Editing Openai/68ed2ed1-5644-8004-ba30-42213bf3dbfa (section)

=== User: Now I know this was a long time ago, but I bet it’s still true… ===
Now I know this was a long time ago, but I bet it’s still true…

In late 90’s the Russian bond default combines with LTCM’s insane leverage almost shut down the entire world’s banking system.  It’s been a while, but as I remember it was because if LTCM failed their liabilities on the trades would transfer to their partner banks, which would destabilize the banks valance sheets and force them to close because  they wouldn’t have enough reserves. Then those bank had partners, etc etc. 

We were hours from the entire financial system shutting down. 

Now, how can there be that level of derivates without a legitimate chance of something similar happening?  ie A contagion that destroys the world’s banking system.