It's about who is regulating the regulators....

The Trojan Horse Meets the Vampire Squid:

The U.S. simply bailed out its banks when they invested in a lot of bad mortgages, but this is a problem of a different magnitude, because in Europe, many of the banks are bigger than the countries in which they are based. If you recall the sorry case of Iceland — a national economy more or less bankrupted by a couple of big bank failures — you’ll remember that the problem wasn’t so much that the losses were so big in absolute terms, but that Iceland is so small. It simply did not have the resources to address the crisis. Spain is not small; nonetheless, Spain’s Banco Santander’s assets exceed Spain’s GDP, and the bank has borrowed a lot of money against those assets — its leverage amounts to about 30 percent of the country’s GDP. And the same is true for many other large European banks: UBS’s assets are nearly 300 percent of Switzerland’s GDP, Espirito Santo’s more than 250 percent of Portugal’s, Paribas’s 150 percent of France’s; and the debt secured against those assets represents an unmanageable chunk of GDP in each case. (See the startling chart here.)