Friday, October 7, 2011

Blame the euros

Major U.S. Banks At Risk If European Debt Crisis Spreads

Although U.S. banks have limited their direct exposure to Greece, they have loaned hundreds of billions of dollars to European banks and governments that may not be able to pay them back, according to the Bank for International Settlements. If some European governments and banks are forced to default on at least part of their debt, American banks could lose a significant amount of money on that account alone.
The resulting panic from investors could compound the losses. Short-term borrowing costs would spike, bank stock prices would plummet and investors could demand their money from banks, several economists say. In a repeat of the liquidity crisis of 2008, some U.S. banks could run out of the money necessary to fund their day-to-day operations.
"We've seen this already," said Jay Bryson, global economist at Wells Fargo Securities. "Some sort of financial crisis in Europe would be enough to finally push the United States economy back into a recession."
Comment: Together we stand, divided we'll fall.

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