This Is the Economic Trigger

The “serious risk” outlined by Fitch Ratings concerning the exposure of U.S. banks to Europe’s contagion is much worse than what is being reported below. There is no “IF” but only a matter of time “WHEN” our banks will fail due to their ties to the European derivative market collapse. The exposure to our banks is in the trillions of dollars.

The amount of money involved is staggering and the bankrupt FDIC will not be able to cover even a fraction of the losses. Congress needs to address this issue now and draft legislation that will insulate the FDIC (and the people) from this catastrophe. Does anyone believe that Congress will address this issue?

David DeGerolamo

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U.S. Banks Face Contagion Risk From European Debt

U.S. banks face a “serious risk” that their creditworthiness will deteriorate if Europe’s debt crisis deepens and spreads beyond the five most-troubled nations, Fitch Ratings said.

“Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said yesterday in a statement. Even as U.S. banks have “manageable” exposure to stressed European markets, “further contagion poses a serious risk,” Fitch said, without explaining what it meant by contagion.

The “exposures” of U.S. lenders to major European banks and the stressed nations of Greece, Ireland, Italy, Portugal and Spain, known as the GIIPS, are smaller than those to some of the continent’s larger countries, Fitch said.

The six biggest U.S. banks — JPMorgan Chase & Co. (JPM)Bank of America Corp. (BAC)Citigroup Inc. (C)Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. and Morgan Stanley (MS) — had $50 billion in risk tied to the GIIPS on Sept. 30, Fitch said. So-called cross-border outstandings to France for all except Wells Fargo were $188 billion, including $114 billion to French banks. Risk to Britain and its banks was $225 billion and $51 billion, respectively.


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