Major U.S. banks have about $80bn in exposure to troubled European sovereigns, about $30bn of which is protected via CDS. Think $50-80bn is a lot? It is. But remember that TARP was a $700bn program. Remember that the Fed will hold interest rates at zero percent through 2014. Remember that these same five banks control over $9tn (with a 't') in assets. $50-80bn isn't very much for these companies.
Yes, there is still secondary risk from a sovereign default tipping over European banks, which then hold up U.S. banks. That's not nothing at all, but isn't everything either: unless it's a huge event, large enough to take down all the big banks in Europe, then I wouldn't be exceptionally worried about it. And if it's that big then there's likely nothing you can do about it anyway.
The European mess is mostly a European mess. We're not nearly as susceptible to them as they were/are to us.
(ht: @EconOfContempt)
IPE @ UNC
IPE@UNC is a group blog maintained by faculty and graduate students in the Department of Political Science at the University of North Carolina at Chapel Hill. The opinions expressed on these pages are our own, and have nothing to do with UNC.
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Monday, January 30, 2012
Global Financial Markets FOTD
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