The real fiscal danger -- in addition to the murky issue of complacency -- is that financial institutions can call AAA debts "risk free" and hold them off their

The real fiscal danger -- in addition to the murky issue of complacency -- is that financial institutions can call AAA debts "risk free" and hold them off their balance sheet. It allows them to leverage-up far more than they otherwise could, and since the big investment banks are publicly traded now it exposes shareholders to undisclosed risk. This is tightly correlated with the problem of credit default swaps. At their core, a CDS is an insurance policy. You pay me a premium every year. If the insured bond defaults, I'll pay you out. Well, if I'm insuring a AAA bond, or the AAA tranche of a bond, I can call that risk-free insurance. IOW, I can call the premiums I'm earning to be risk-free profit.