DO YOU REMEMBER THE OLD JOKE ABOUT THE FUSE?

(Via Moe Tkacik at TPM Muckraker)

It goes something like this: The $2000 stereo shorted out to protect the 40 cent fuse. Well, cities and towns across America have been hit with something similar because they purchased credit-default swaps from monoline insurers like MBIA to lower the interest they would pay on their municipal bonds. When those insurers had their credit ratings lowered because they were exposed to the Big Shitpile, the cities and towns had to fork over more collateral for the bonds they issues.