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View Diary: Bleed, you sinners! (128 comments)

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  •  European Banks (7+ / 0-)

    will need to be bailed out.  They are carrying the Greek debt on their books at their face value.  A Greek default would mean that the banks don't have enough risk capital.

    A Greek default would also probably cause the price of the other PIGS debt to explode.

    Geithner was right (that was hard to write) in regarding the Greeks very similar to the position Lehman played in 2008.  Geithner concluded that letting Lehman fails was a huge mistake because it had secondary effects.  A Greek default would have secondary effects as well, and it is in the Northern European interest to help them recover.

    But I am not sure that they see it that way.

    The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

    by fladem on Thu Sep 22, 2011 at 08:08:29 AM PDT

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    •  well (14+ / 0-)

      I agree that European banks will need to be bailed out in the end, but Geithner is hardly a disinterested party: he's been the advocate (yet again) of the big US banks which also have massive exposure to Greece and the others thanks to their massive sales of CDSs on sovereign debt which European banks bought - it's not obvious that the big French and German banks have that much of an exposure to Greek bonds these days, but it is clear that Geithner has also been pushing for Greece to be bailed out so that Wall St. would not bear the corresponding losses.

      •  If they need to (2+ / 0-)
        Recommended by:
        3goldens, PrahaPartizan

        bail out, it needs to happen now.  The uncertainty is making a European Recession probable.

        Geithner isn't disinterested, though my understanding of the CDS the US banks hold is that they are net not very big.

        The European Bank exposure is to the PIGS in general, and if Greece goes down it is not obvious that it won't take the others with them.  My understanding of the Greek exposure as it relates to some fo the big German banks is different than yours.  But as a group they are insanely over-leveraged, and the secondary risk from a generalized recession is very significant.

        The Lehman example is relevent here.

        As I said - he is clearly right.

        The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

        by fladem on Thu Sep 22, 2011 at 09:21:31 AM PDT

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      •  Agree with Jerome (2+ / 0-)
        Recommended by:
        Egalitare, alizard

        According to this chart (prepared last Dec)  Greece is kind of a small potato (as compared to other PIGS).  

        (The chart shows the amount owed between [EU] countries, in Billions of dollars.  A perspective...)

        ~A govt lobbied, campaigned and selected by corporation... is good for corporation. Bad for people.~ -8.88 -8.36

        by Orj ozeppi on Thu Sep 22, 2011 at 10:35:58 AM PDT

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