Europe’s debt and Obama’s re-election
In fact, the U.S. financial system’s massive exposure to troubled European banks “should be keeping Mr. Obama awake at night,” said Desmond Lachman at The Wall Street Journal.
Desmond LachmanThe Wall Street Journal
Propelled into office largely by economic disaster, President Obama may see his re-election “thwarted by yet another financial crisis,” said Desmond Lachman. This one, though, is starting in Europe. The Europeans look less able than ever to contain their debt crisis, and their failure to do so would be a “monumental electoral setback” for the president. In fact, the U.S. financial system’s massive exposure to troubled European banks “should be keeping Mr. Obama awake at night.”
Our money market industry has more than a trillion dollars—about 45 percent of its assets—in European banks, and U.S. banks have another $1.2 trillion in loan exposure to their French and German counterparts. These institutions will face massive losses if Greece defaults, and that prospect is looking very likely. A disorderly default there could trigger “a Lehman-style banking crisis in the European core,” and the resulting credit crunch would badly hurt chances for growth in the U.S. Obama has little control over Europe’s fate, but American “voters may punish him” for it anyway.