You're all idiots. Unless I am
14 Ottobre Ott 2011 0742 14 ottobre 2011

And if the problem is the American banks, not the European ones?

So, with all the focus over the summer being on the European crisis, it is easy to forget that America is not in the best shape either. The budget deficit is likely to hit 10% again this year with no sign of it dropping or any political will to tame it. But it does have the world's reserve currency and so 10 year bond yields are only around 2% as investors look for a safe haven for their funds. And it maintains its AAA rating.

Europe is split. The Northern export led countries, centred around Germany, are seeing a similar safe haven bid, while the periphery is being sold and downgraded. And, while the German and French government bond yields have remained low, the share price of the banks of these countries has come under pressure as worries about Greek default and contagion swirl around.

So what is the market saying about bank credit via their CDS? I'll start with some Europeans:

Rabobank 114, ING 189, BNP 222, SocGen 303, Intesa San Paolo 365, Unicredit 370.

So worries seem to be mainly related to the country where the bank is located with the French banks suffering due to their Greek exposure.

Now the Americans:

JP Morgan 134, Citigroup 228, Bank of America 335, Morgan Stanley 358.

And they are just as bad as the Europeans. Morgan Stanley and Bank of America are approaching the levels of the Italian banks despite being located in the world's safe haven. Citigroup and BNP are on a par when BNP is supposed to be the poster child for bad management, Greek exposure and questions have been raised about its ability to fund itself. American banks, according to the credit markets, have just as many problems as the European ones, but we have been hearing less about them. This is worth bearing in mind because the European problems are out in the open and related to the sovereign worries and contagion through the periphery. What is happening in America to cause such a degree of fear?

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