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Robert A. Graf
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Robert Graf is an independent investor entrepreneur, and educator with a 20+ year academic background in pharmaceutical sciences and pharmacology. He focuses his attention on index options, top performing small cap companies, commodities, and is a student of price action. He is founder,... More
  • PIGS in perspective: A comparison of US exposure to European countries 0 comments
    Apr 25, 2010 6:38 PM

    You may already know that the US exposure to the whole PIGS problem has been estimated to be $176B USD, and that the whole amount is spread over the 10 largest US Banks including Bank of America (NYSE:BAC), Citibank (NYSE:C), JP Morgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), State Street (NYSE:STT), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Deutsche Bank (NYSE:DB), and HSBC (HBC), according to Stacy-Marie Ishmael published in the Financial Times from data compiled by Barclay's Capital.  FFIEC data further breaks these amounts down to $9B for Portugal, $18B for Greece, $68B for Spain, and $82B for Ireland (all USD).  Compared to the tier 1 capital base for the aforementioned banks of $848B, major American banks have 21% exposure to the PIGS problem--not insignificant.  However, if we compare this to the exposure of the major economic countries in Europe, we have $510B of exposure to Spain alone by Germany ($220B) and France with $190 andthe U.K. with $100B according to data from the Bank of International Settlements.  That's already a lot compared to our significant number of $176B USD, but it gets even deeper.  For example, when we look at the combined exposure of European banks in Germany, France, and the U.K. to Ireland we get another big number: $465B USD, with Germany exposed to a whopping $180B, France at $80B, and the U.K. with a staggering $205B USD worth of exposure.  So with such consternation in the news over a period of weeks now from Germany regarding Greece, let's finally put that in perspective:  Germany is exposed at $40B, France at $80B, and Switzerland at $70B for a total of $190B USD, or a little more than the American Banks in the whole PIGS ordeal.  Although we can take minor comfort that the U.K. can print money and that the Greek part of the PIGS problem might be addressed, it still remains a daunting problem of mass proportions for the European banks that hold the remaining debt outside of Greece.  Even if a domino effect were stopped, just the independent balance sheet levels of debt for Germany and France especially are overwhelming, especially compared to the overall U.S. bank exposure.  This posting may help provide some perspective of why Wall Street is reacting so much to this dilemma, realizing that our American involvement in Europe is probably just around the corner.



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