I wrote several times about the responsibilities of the US banking system in generating the present financial crisis. In fact, US banks encouraged families and companies to borrow large amount of money, despite it was quite clear that kind of debt wasn’t sustainable. And in the end this is what happened, with a US economy eager for abnormally low interest rates (it may be interesting that the historic weighted average of the FED Funds Rate is 5.69%, well above the current rate), and large banks, such as Citigroup having large losses coming from this subprime mortgage crisis. One may think that the European banking system acted wiser, since European banks did not engage in such risky operations. Or did them?
In fact, some people and analyst are starting to think that probably Europeans banks account are bad as the US ones, but European banks are trying to hide this in any way.
In fact, it’s quite strange what happened in Société Générale, where a single trader had allegedly fraudulently lost 4.9bn euros. Someone thinks that this single trader may be a scapegoat to hide group-wide risky operations, since it’s difficult to believe that really nobody suspected anything. Surely it’s a big blow to the image of the entire European banking system: how can you entrust with your hard-earned money a bank that did not know where were invested over 50 billion euros (since the 4,9 bn is the loss, but the overall allegedly fraudolently invested sum is 50 billion, nearly 75 billion dollars)?
In my opinion, it’s really needed a worldwide leap to increase the transparency of the whole financial system, since it’s needed to prevent further straying of the financial markets.
Original italian post: Banche americane contro banche europee: chi è peggio?
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