Inside Financial Services

WESBURY: PIIGS HAVE NOTHING ON LATIN AMERICA IN THE 1980S

First Trust's Brian Wesbury, whose work is always worth consulting when one is desperately looking for the bright side, provides some perspective on the U.S. banking industry's exposure to the PIIGS:

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First Trust’s Brian Wesbury, whose work is always worth consulting when one is desperately looking for reasons to look on the bright side, provides some perspective on the U.S. banking industry’s exposure to the PIIGS:

[T]he five largest US banks have only $54 billion in exposure to the debts of Greece, Portugal, Italy, Ireland, and Spain, combined, versus more than $700 billion in bank capital. In the early 1980s, when Latin and South American countries were defaulting, the eight largest US banks had exposure to those countries equal to 263% of capital.

There, I feel better already. . . U.S. banks’ counterparty risk vis-á-vis European banks loaded down with PIIG exposure is also highly overblown Wesbury says.

3 Responses to “WESBURY: PIIGS HAVE NOTHING ON LATIN AMERICA IN THE 1980S”

  1. No Banker Left Behind

    Feeling better are ya’ Matt? Let’s look at another genius-like piece of critical thinking on Wesbury’s part, this from early 2008:

    “For many, this catastrophic outlook brings back memories of the Great Depression, when bank failures begot more bank failures, money was scarce, credit was impossible to obtain, and economic problems spread like wildfire.

    This outlook is both perplexing and worrisome. Perplexing, because it is hard to see how a campfire of a problem can spread to burn down the entire forest. What Federal Reserve Chairman Ben Bernanke recently estimated as a $100 billion loss on subprime loans would represent only 0.1% of the $100 trillion in combined assets of all U.S. households and U.S. non-farm, non-financial corporations. Even if losses ballooned to $300 billion, it would represent less than 0.3% of total U.S. assets.”

    How did that call work out for him (and us)…………..

  2. Matt Stichnoth

    NBLB–

    You’ll get no argument here that BW likes to walk on the sunny side of the street. That said, the recession didn’t turn into a replay of the Great Depression–8% is still a lot less than 263%.

  3. Matt Stichnoth

    NBLB–

    You’ll get no argument here that BW likes to walk on the sunny side of the street. That said, the recession didn’t turn into a replay of the Great Depression–8% is still a lot less than 263%.

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