U.S. banks seek European deals, don’t pause to thank U.S. regulators.

A story in today’s New York Times talks about how U.S. financial firms are stepping in to buy up assets that European banks are being forced to shed. But it buries the lede: that government regulation deserves the credit for leaving them in the financial condition to do so.

Today’s New York Times has a story about how European banks are selling assets (including in the U.S.) to build up their threadbare capital cushions, and how U.S. banks and private equity firms are buying. I wonder who the audience is for this kind of story. If you’re Citibank or KKR you presumably already know that, and where, such opportunities are to be found. Nor can there be that many general readers who care whether a French or an American bank holds the mortgage on some Florida hotel. I suspect that this is actually thinly disguised advertising for the local industry—”if your European credit lines are shrinking, come on over to Wall Street!”—but as that genre goes, this story seems pretty harmless.

The most interesting part, though, is as usual buried towards the end:

But American institutions remain stronger than their European counterparts, said Christopher Kotowski, an analyst with Oppenheimer.

“Everyone is going to be cutting staff and shrinking capital commitments but the Europeans are doing it more,” Mr. Kotowski said. In large part, that’s because earlier in the United States financial crisis, Washington forced American banks to take huge write-downs, while raising tens of billions in fresh capital and halting dividends to conserve cash. European banks have been much slower to take those steps.

Somehow I doubt that the banks themselves will give government regulators much credit for this. But we should. I propose a new slogan: “Trust your bank? Thank your government.”

Author: Andrew Sabl

I'm a political theorist and Visiting Professor (through 2017) in the Program on Ethics, Politics and Economics at Yale. My interests include the history of political thought, toleration, democratic theory, political ethics, problems of coordination and convention, the realist movement in political theory, and the thought of David Hume. My first book, Ruling Passions: Political Offices and Democratic Ethics (Princeton, 2002) covered many of these topics, with a special focus on the varieties of democratic politics and the disparate qualities of mind and character appropriate to those who practice each of them. My second book Hume's Politics: Coordination and Crisis in the History of England was published in 2012; I am currently finishing a book on toleration, with the working title The Virtues of Hypocrisy, under contract with Harvard University Press. A Los Angeles native, I got my B.A. and Ph.D. from Harvard. Before coming to Yale I taught at Vanderbilt and at UCLA, where I was an Assistant, Associate, and Full Professor; and held visiting positions at Williams, Harvard, and Princeton. I am married to Miriam Laugesen, who teaches health policy and the politics of health care at the Mailman School of public health at Columbia, and we have a twelve-year-old son.

One thought on “U.S. banks seek European deals, don’t pause to thank U.S. regulators.”

  1. American taxpayers are sitting at a poker table with Wall Streeters. And the old adage applies: If you don’t know who the sucker is; it’s you. And we’re the sucker.

    One Wall Streeter to another: “Hey, lose all your clients’ money to me, and we’ll split it.”

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