Europe's looming calamity

There are plenty of reasons to be freaked out by the banking and sovereign debt crisis now reaching a crescendo in Europe. But one factor that’s gotten little attention could turn this Very Bad Situation into a True Calamity.

It’s this: Regulators here and in Europe have no idea — repeat, no idea — of the full extent of the derivatives exposure that could be triggered by an “official” Greek default, or by the failure of a major French bank. And if the people in charge have no clue as to the fallout from what may be trillions of dollars in side bets waiting to be triggered in a catastrophic cascade, they’re basically flying blind.

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