European Debt Crisis

Fitch warning causes U.S. stocks to drop

Stephen Beard Nov 17, 2011
HTML EMBED:
COPY
European Debt Crisis

Fitch warning causes U.S. stocks to drop

Stephen Beard Nov 17, 2011
HTML EMBED:
COPY

Steve Chiotakis: Ratings agency Fitch caused a big slide in American stocks yesterday, after it warned that American banks would take a big hit if the eurozone crisis gets worse. But just how exposed is the U.S. to what’s going on in Europe?

From London, here’s Marketplace’s Stephen Beard.


Stephen Beard: Fitch concedes that American banks have been pulling money out of Europe for over a year, especially from the most vulnerable countries like Greece. But the U.S. banks still have a big exposure to France, and Fitch warns the French could soon be dragged into the crisis.

The ratings agency’s also worried about the insurance coverage the banks have taken out to protect themselves against losses from a default. Fitch says that coverage may be ineffective.

Bob McKee of Independent Strategy says, just look at what’s happening in Greece.

Bob McKee: The Greek government is arranging a voluntary haircut or default with its private sector creditors, which would not invoke what they call a “credit event,” and therefore not invoke the insurance.

Fitch says U.S. banks could suffer in other ways if the eurozone debt crisis worsens. The money markets where they raise a lot of cash could be disrupted.

In London, I’m Stephen Beard, for Marketplace.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.