Robert Reich: Behind Europe's Debt Crisis Lurks Another Giant Wall Street Bailout

[Yavin4]

But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.

http://robertreich.org/post/11033625495


Quick summary: if Greece defaults, so will Italy, Spain, Portugal, and Ireland. If that happens, then French and English banks default. If that happens, they won't pay back their debts to U.S. banks. IOW, cascading defaults.

So, the IMF, the Fed, the ECB, etc. are all desperately trying to arrange a bailout using taxpayer funds, whether those taxpayers will be German or the U.S. is unclear. Bottom line, there may be another taxpayer bailout of the banks in our near future.

[FarCenter]

1. Another oversimplification by Reich

There is also a huge investment in European bank paper by Money Market Funds, pension funds, endowment funds, insurance companies, etc. It was actually a MMF "breaking the buck" in '08 that finally caused the US government to belatedly act. Once the MMFs start going below the $1 / share value, a run on the MMFs causes the US economy to go into cardiac arrest.

[Moostache]

4. We already have a zombie economy....why is that a good thing?

We tried to "save" this system once already....maybe a massive heart attack and death is the better option this time...

"Saving" this system has entailed from the outset the protection of those responsible and the prevention of justice from restoring order to markets and to finance. The beast of the F.I.Re. sector of the economy out grew its purpose and its utility. Its time to crash it back to earth and reset the entire thing.

How? I don't know. I won't pretend to have that answer.
Why? That I DO know - because fundamental fairness and justice cannot survive in a world where no believes the law applies to the law breakers any longer. Its a path to total anarchy and chaos.

Maybe crashing the economic system brings that about faster, but we're already on that path...if the pain is inevitable (as it appears to be), then ripping off the band-aid fast and moving on is better than slowly peeling it back...

[harun]

5. He can't get too wonkish if he wants to reach a wide audience.

[FarCenter]

7. True, but he comes across as clueless about how the financial system works

Apparently the labor economists don't interact with the ones who study the financial systems at Berkeley.

[Moostache]

2. A second bailout = full scale revolution.

In the US anyway...

The rage that would explode across the country scares everyone, but if the banksters like Blankfein and Thain and Fuld and Mack believe for one second that they can escape being jailed or killed by mobs in the face of a second raping of the US taxpayers, then they really are delusional and living in a fantasy world.

We are ALREADY on the precipice of revolution and another event like the heist of 2008 would seal the fate of the current system and order.

DO NOT EVEN THINK ABOUT BAILING OUT BANKS AGAIN!
They made the bets, they danced at the ball, and its time to pay the piper!

TAKE BACK OR SEIZE EVERY DOLLAR IN COMPENSATION AND / OR ACQUIRED ASSETS TO ALL OF THEIR EXECUTIVES FIRST - TO PAY WHAT CAN BE PAID AND THEN HIT THE RESET BUTTON AND START OVER.

[mod mom]

3. dupe. here:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=2058388&mesg_id=2058388

[banned from Kos]

6. Nice theory but Reich is wrong

http://www.fool.com/investing/general/2011/10/04/the-real-cost-of-a-greek-default.aspx

The table above lists the exposure Euro banks have to Greece - very little as a % of their asset base.

Spain and Italy will get their act together. Greece is lost.

[moondust]

8. "The real problem is the financial system — centered on Wall Street."

"And we still haven’t solved it."


Will anybody on Wall Street accept any responsibility for Europe's problems? How much of it is due to Wall Street's predatory practices and competitive mischief? How much is due to Wall Street simply leading the world into the darkness of insatiable greed and amorality?

[banned from Kos]

9. Wall St has no culpability as far as Europe is concerned

Northern Rock, RBS, the Irish banks, Greece - all blew up on their own debt issues.

[moondust]

10. Oh, is that how the story goes?

:eyes: