Half Of Top U.S. Banks Made Loans To European Banks: Fed

WASHINGTON (Reuters) - Around half of top U.S. banks surveyed by the Federal Reserve reported making loans or extending credit to European banks, which are under massive pressure from an ongoing political crisis.

The findings from a quarterly lending poll suggest that the U.S. banking system faces significant risks from Europe, despite relatively small direct exposure to the troubled sovereign bonds of southern European states like Greece.

"About one-half of domestic banks respondents, mostly large banks, indicated that they make loans or extend credit lines to European banks or their affiliates or subsidiaries, and about two-thirds of the foreign respondents indicated the same," the U.S. central bank said in its Senior Loan Officer Survey, published on Monday.

Of the domestic banks, about two-thirds reported having tightened standards on loans to European financial institutions in the third quarter, many considerably.

Euro zone governments rushed to placate feverish bond markets on Monday as the currency bloc's debt crisis threatened to accelerate out of control, with Italy overtaking Greece as the prime threat to stability.

Italian government bond yields rose to their highest since 1997 -- approaching levels regarded as unsustainable -- as political turmoil in Rome threatened to drag the euro zone's third largest economy deeper into regional debt crisis.

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[wingnutz]

10:25 AM on 11/08/2011

NY Wait! Isn't the FED the entity that gave out money/loans to foreign banks when the meltdown started? What incredible, predictable hypocrites. They are economic terrorists. I'm completely FED UP with them all. I'm the 99% economically, and the 1% who fought for our country in war time. The OWS need to exercise their 2nd Amendment rights and arm themselves for the coming revolution.

[knewsreply]

11:50 PM on 11/07/2011

Congress bailed out the US banks with tax money. One reason for this bail out was to help Americans keep their homes. Was this money used to European banks? As Badfinger1 states, " ....Sure, they could have used the near 0% fed money to help rewrite mortgages here in America...­.But instead took the cash and lent it to euro banks for over 4%...."

[tacevad]

11:05 PM on 11/07/2011

give the big banks those near zero % federal loans and let them make as much as they can with it anywhere they can with no regulations...yeah that's been working great hasn't it?

[Reno Fickler]

04:50 PM on 11/07/2011

I view this as the govt subsidising the purchase of Lottery tickets.

[DiogenesOfAlaska]

04:28 PM on 11/07/2011

"Around half of top U.S. banks surveyed by the Federal Reserve reported making loans or extending credit to European banks"

I doubt it. More like, all of them. And it's 100% normal. Business as usual. It's called the interbank market.

And it's fairly ridiculous to even be discussing this. What would be the significance or chance of success of all the liquidity poured into the interbank market by various different central banks if it were reasonable for some nation's banking sector to not lend to another nation's banking sector?

It would be signaling trouble if ONLY half of top US banks had made loans to some european ones.

[Badfinger1]

04:26 PM on 11/07/2011

....Sure, they could have used the near 0% fed money to help rewrite mortgages here in America....But instead took the cash and lent it to euro banks for over 4%....
I smell defaults and bailouts coming again......for the American people though, NO bailouts.....
....Isn't it time for fight club rules?

[Charles W Noble]

04:17 PM on 11/07/2011

What risk? American banks don't take risk. If it does well, they make money. If it doesn't, they take the bailout. That's why being too big to fail is such an awesome thing for banks.

[romano70]

04:00 PM on 11/07/2011

This is going to be the first time I agree with conservatives: if the big banks fail over this, let them. The pain will ne enormous for the USA but at least the whole republican theory that deregulation is better will be totally discredited.

[Sundialsvc4]

04:00 PM on 11/07/2011

Now ... isn't that ... interesting.

"US Banks" seem to have all the money in the world, to "lend to" the European sovereign states. They have "all this money" because the Federal Reserve and the Treasury "lend" all this money to them, at zero interest, "backed by the full faith and credit of the United States" to the tune of never-mind how many Trillion (that's with a "T") US Dollars.

Yup ... no matter how big and nonsensical that "national debt" number gets, the money just keeps rolling in, and it just keeps rolling over to Europe where ... magically ... the entire continent is supposed to accept that it is "mired in debt."

(And oh by the way, the ordinary cities of America are simultaneously supposed to believe that they can't afford to keep the streetlights on.)

And what keeps all this nonsense going? You got it: Bribery.

You see, it turns out that the occupants of Washington, DC have this stupendous sense of blindness. As long as "they've got theirs," they don't actually care where it comes from. Receiving millions of dollars a day, every day, is .. why .. "it's a Constitutional Right!" Being in office forever is "the divine right of Kings." Law-enforcement is only for those who cannot pay.

[gomezrules]

03:28 PM on 11/07/2011

Didn't the Fed itself lend out trillions to both domestic and overseas institutions? Let's see... http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html

[Michigan Joe]

03:17 PM on 11/07/2011

Doesn't it appear that the US Banking industry has been behaving like an addicted gambler? First they take money from the common depositor in small communities and then use Moodys as their odds maker and gamble that money overseas and then when they lose it, they expect the government to pick up the pieces and then they reward their CEOs with bonus' because they sold that idea to our government. Who is the biggest fool in this scenario?

[walstir]

04:33 PM on 11/07/2011

All bank "money from the common depositor in small communities" is insured by the Federal Deposit Insurance Corporation. The FDIC is a United States Government owned and administered corporation; but does not receive any government funding. Its income is generated by premiums paid by banks and other thrift institutions who pay for investment earnings and insurance on deposits. Only depositors with more than $250,000 in an account face any risk.
See: http://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation

[Realist2011]

07:39 PM on 11/07/2011

You're mostly correct. The FDIC insures those accounts, however, should their reserves be depleted, then yes, the government will step in to pay off depositors. And, if you're interested, the FDIC has already been expressing significant concern about this very problem, along with displeasure that BoA (and probably others) are dumping worthless derivatives into the regulated bank side of their businesses, meaning, the bank's actual stability, in a crisis, is potentially being severely compromised, at taxpayers expense (again). In a case of a regulated bank failing, and the assets being worth very little, then once again, we'll be bailing out these banks because we were dumb enough to do it the first time, instead of letting them fail. Deja Vu (again).

[meow2u3]

04:35 PM on 11/07/2011

You're half right. The US banking industry has been behaving more like a mob-run casino operator than a gambling addict. They fleeced investors, workers, homeowners, and the general public and then when the money's run out, they make the government an offer they can't refuse. Either the Presiden't signature or his brains will be on the no-strings-attached bailout bill.

[cheesesteak wid]

03:02 PM on 11/07/2011

this is the result of Obama's bailout. Banks not investing in the US but rather risk it on Eurotrash.

[romano70]

04:02 PM on 11/07/2011

Your statement has no logic: when the US government was downgraded (due to republican incompetence and posturing) investors kept buying US debt like always. If they bought European debt was because the federal government didn't forbid it when it actually should have

[tacevad]

11:08 PM on 11/07/2011

amnesiac... Bush did the bailout schtick

[cheesesteak wid]

06:17 PM on 11/08/2011

Oh, and who pushed the 700 billion bailout without every reading the bill. Pelosi, Reid, Obama, weren't they in office last year ?