Commentator Robert Reich says the defining political issue of 2012 won’t be the government’s size. It will be who government is for.
Commentator Robert Reich says the defining political issue of 2012 won’t be the government’s size. It will be who government is for. - 
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Kai Ryssdal: The solution to the debt crisis in Europe has a long way to go. We've got our own problems over here. We all know what they are.

Commentator Robert Reich says Europe should definitely be among 'em.

Robert Reich: As the Europe debt crisis worsens, our big problem won't be dwindling exports to Europe. Our increasing exports to China and South and Central America will help cushion that blow. As will lower borrowing costs here in the U.S. Europeans and others worried about where to park their savings are buying up Treasury bills. No, our biggest problem will be big Wall Street banks with significant exposure to European banks. This is what we need to worry about. New data released last week by European banking regulators shows growing odds of European banks suffering losses tied to European government bonds.

As Europe comes ever closer to the precipice of a Greek default, those bonds are worth less and less. Which means Wall Street is sitting on a pile of European bank IOUs, credit default swaps, derivatives, and lots of other paper that's becoming riskier with every passing day. But no one knows the extent of the exposure of our banks to European banks because -- believe it or not -- we're still back where we were before 2008, when no one knew much of anything about the inter-connectedness of all these financial players.

Investors in Wall Street banks are guessing it's pretty bad. Which is why stocks of major U.S. banks are down 20 percent this year, by far the worst performers in the S&P 500. The S&P is down for the year but would be up over 3 percent if financial stocks were excluded.

But wasn't the Dodd-Frank financial reform legislation supposed to fix this? That was the intent, but Wall Street lobbyists made sure Dodd-Frank didn't work. For one thing, the law diffused responsibility for financial oversight across ten different agencies instead of a single Federal Reserve. And none of these agencies is taking real responsibility for avoiding systemic risk.

In addition, Dodd-Frank left the biggest Wall Street banks bigger than they were before -- way too big to fail. So if things go very badly in Europe, the end game of the European debt crisis for America could easily be another Wall Street bailout. Not a very nice way to ring in 2012.

Ryssdal: Robert Reich. His most recent book is called "Aftershock: The Next Economy and America's Future." Send us your thoughts.