European banks and the crisis

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We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for "regulatory capital relief rather than risk mitigation". In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.

from here

Some banks are bigger than governments: their assets are greater than their home countries’ economies.

See the chart

see also A timeline of bailouts, bayouts and takeovers