I started my reporting career in Texas, which in the late 1970s had a curious banking system.
The idea was one bank, one office. We had banks with branches, but each branch pretended to be a little separate. Holding companies controlled the networks. While I was still there this was cleaned up, so that Texas banks took their honored place among the elite.
The 1980s were tough for Texas. As tough in their way as the last years have been for Greece. One key to the recovery was that eventually all the big Texas banks went under. Many were taken over by North Carolina National Bank (NCNB), which later became NationsBank and, finally Bank of America (BAC). The joke in the early years of the takeover was that NCNB stood for “No Cash to No Body.”
How does this relate to Greece? Well, when you take out the money they loaned the government, and all their other failed obligations, the Greek banking sector is broke--bankrupt, kaput. Smart Greeks, like people in the other PIIGS (Portugal, Ireland, Italy and Spain) have been able to move their money, pulling out of domestic banks, into German ones.
This should be seen as a feature of the Euro, not a bug. While, technically, banks have not been allowed to compete across borders, they actually have been. German banks have been soaking up the Eurozone's deposits. Greek money is already in German hands, trusting those hands to make profitable decisions.
All Greeks should have that right, just as all Portugese should, and all Irishmen should. If that means that German and (maybe) French banks become the absolute center of economic life on the continent, with the power to stop profligate spending by refusing to buy the bonds, what's the problem? Better that the auctions fail rather than having instruments which can't trade.
In Texas' case, the state eventually came back. The oil price eventually came back, with a vengeance. Greece will come back, too. But just as New York and North Carolina banks came to control the Texas economy, so Germany may have to control Greece's.
From an investment standpoint, the knowledge that Euros are fungible, that they can already move around, should be bullish for companies like Deutsche Bank (DB) and Commerzbank (CRZBY.PK). In the search for economic solutions, it's always good to look to the strong hands.
From a policy perspective, what's increasingly clear is that the eurozone is already one market, for all intents and purposes. Laws have not yet caught up with the reality, but capital flows are forcing policy's hand.