The Dow dropped 2% this morning EST as investor confidence in Italy collapsed. Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, has around $2.5 billion of  credit exposure to Italian debt in various direct and indirect forms. Even taking hedges into account, Goldman would still be circa $750M dollars to the bad.

This is big bucks, but way, way behind some of the other big players. Morgan Stanley’s post-hedged exposure to Italy is $1.9 billion, but Top of the potential Pops is JPMorgan’s exposure, at an eye-watering net net after hedges of $5.5 billion.

The trouble with Italy has always been that, while to many Europeans it’s a bit of a joke as a political culture, economically it is BIG. Goldman itself admitted this afternoon that Italy accounted for more than half of the estimated $4.3 billion of  exposure the firm has to the five ClubMed debtors. “Over half” is also the attribution of total debt being assigned by insiders at JPM.

As The Slog has predicted for over a year now, once Crash 2 starts to roll, both speed and size grow exponentially, rather than as a multiple. The problem then becomes that some institutions are better equipped with anti-earthquake foundations than others. Bank of America  for example has Italian-linked exposure at $6.6 billion….but sources disagree as to how much of this it has hedged. The majority think it will be the first to fall over as things get tougher.

Another unknown quantity is Barcap. It is a victim of its own dodgy reporting in many ways. In the 2010 EU stress tests, Bob Diamond’s little toy passed with flying colours…but then produced numbers suggesting more Italian debt exposure than had been suggested by those stress tests. A month ago, however, the investment bank claimed to have reduced its Italian exposure by 30%. But all things are relative: 30% of what, exactly?

Stay tuned. Now the political pinhead-dancing is almost over, there will be real news pretty much every day until the lava has finished flowing.

Staggeringly, there is a brighter side at The Big Top