New York Times: Το σχέδιο διάσωσης της Ελλάδος είναι σχέδιο διάσωσης των Ευρωπαϊκών Τραπεζών

EDITORIAL

Greece and You

The euro-zone bailout of Greece is, in good part, a bailout of European banks. In France and Germany alone, banks hold some $90 billion worth of public and private Greek debt. The European Central Bank also holds Greek government debt, and the fear is that if Greece defaults, cascading losses could threaten all of Europe.

Are American banks also vulnerable? No one is sure. They are not big lenders to Greece, but they are big players in the derivatives markets. If Greece defaulted, a European bank holding a credit-default swap on Greek debt from an American bank would be entitled to a payout from that bank.

Credit-default swaps are the kind of derivatives that were behind the blowup of the American International Group and the near meltdown that followed in the global financial system. From the available evidence, it doesn’t appear that a Greek default would have the same destructive power, but no one is eager to test the proposition.

In his recent confirmation hearing to be the next leader of the European Central Bank, Mario Draghi, the central banker of Italy, warned that no one really knows who is on the hook for these risky financial instruments. “Who are the owners of credit-default swaps? Who has insured others against a default of the country?” he asked.

Warning of a potential “chain of contagion,” he argued against requiring banks to restructure Greek debt — which could involve extending repayment terms or writing off principal — even though Greece’s apparent inability to pay in full makes a restructuring all but inevitable.

Whether or not American banks are at serious risk from this crisis, the fact is that nearly three years after A.I.G., derivatives are still largely unregulated. The financial reforms that are supposed to improve transparency and reduce speculation — trading derivatives on fully regulated exchanges, strict reporting requirements to regulators and new rules on capital adequacy and business conduct — have yet to be implemented.

The process has been slow in the face of heavy lobbying by the banks. Republican lawmakers are bent on derailing reform by any means necessary, including starving regulatory budgets, impeding the confirmation of regulatory nominees and pressing regulators to adopt light-touch rules. Some Democratic lawmakers and Obama officials are in favor of exemptions on specific derivatives rules that Wall Street opposes.

The uncertainty is greater when you consider that credit-default swaps are only one type of derivative that links banks worldwide. What dangers lurk in other derivatives, like those on currencies and foreign exchanges?

Greece is bound to get more bailouts as long as policy makers believe the alternative could be systemwide collapse. On Tuesday, the Greek Parliament gave the prime minister, George Papandreou, a vote of confidence, clearing the way for another tough vote next week on wage cuts and other painful austerity measures that European officials are demanding in exchange for more aid.

The Greek debt crisis is another reminder of how little has really changed since the financial blowup — and how much more must be done to avert a repeat here and around the globe.