U.S. banks at risk in European defaults
The logo of the European currency Euro stands in front of the European Central Bank.
MOON: A possible second bailout for Greece is still being hammered in Europe since last year's big rescue package failed to pull the country out of its debt crisis. Now, a fresh report shows just how vulnerable U.S. banks might be to the ongoing crisis.
Joining us live on this, Marketplace's Amy Scott -- good morning.
AMY SCOTT: Good morning Bob.
MOON: Amy, how did U.S. banks get so tied up in European finances?
SCOTT: Well, it's the way the global economy works. You know, banks lend to other banks, they're all sort of tied up together. And according to the Bank for International Settlements, which is a group of central banks from around the world -- U.S. banks have $41 billion in actual and potential exposure to Greece. That is in the form of loans and other financial transactions. And it makes the U.S. second only to France in that department. U.S. banks are also heavily exposed to other troubled economies like Portugal and Ireland.
MOON: So if Greece or any of these countries were to default on their debt, how worried should we be?
SCOTT: Well, I asked banking consultant Bert Ely that question. And he says that banks have hedged against that risk, so it's not likely to drive any of them, you know, out of business. But he says the bigger concern is the impact on the global economy.
BURT ELY: If these debt defaults lead to a substantial slowing of economic activity, then that just has a slowing effect on the global economy. And that feeds back into the U.S.
And that's at a time when we're learning our own economy isn't, of course, recovering as fast as many thought.
MOON: Marketplace's Amy Scott thanks.
SCOTT: You're welcome.