Wednesday, 5 October 2011
ROBERT REICH: Behind Europe's Debt Crisis Lurks Another Giant Bailout of Wall Street
But Morgan says its exposure to French banks is zero. Why the discrepancy? Morgan has probably taken out insurance against its loans to European banks, as well as collateral from them. So Morgan at least feels safe.
Should it? Does anyone remember something spelled AIG? That was the giant insurance firm that went bust when Wall Street began going under. Wall Street thought it had insured its bets with AIG. Turned out, AIG couldn’t pay up.
Haven’t we been here before?
Republicans and Wall Street executives who continue to yell about Dodd-Frank overkill are dead wrong. The fact no one seems to know Morgan’s exposure to European banks or derivatives – or that of most other giant Wall Street banks – shows Dodd-Frank didn’t go nearly far enough.
Regulators still don’t know what’s happening on the Street. They don’t know whether Morgan is telling the truth. They have no clear picture of the derivatives exposure of giant U.S. financial institutions.
Which is why Washington officials are terrified – and why Treasury Secretary Tim Geithner keeps begging European officials to bail out Greece and the other deeply-indebted European nations.
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