[thephyber]

To be fair, I think every financial instrument works this way (the transitive property of assets which own assets) all the time.

Having regulations which restrict which companies are allowed to trade specific classes of instruments/services (eg. Glass Steagall) helps mitigate this, but doesn't even approach eliminating it.

[clairity]

it does work that way far too often, and that's exactly the problem. financiers are no smarter than other kinds of market participants, and that's what this shows.

markets require relative participant independence for pricing and allocation to function properly, otherwise we get bubbles. and now, we get constant bailouts (of capital, not labor), so on top of that, there's no downside risk to provide any counterbalance. it's corrupt.