Seeking Alpha
May 2, 2011
What would be the worst investment today in an investor sentiment poll? Nuclear energy companies? The US dollar? Spanish real estate? Greek banks would certainly be a top contender.
We all know the commonly accepted narrative that a 2008 financial crisis caused an economic crisis. Banks in the US, Ireland, and Spain recklessly lent to homeowners and real estate builders, bought toxic structured securities, and applied leverage that wiped out their equity. The US bailout was possibly a qualified success; the Irish bailout was an unqualified disaster. Both countries’ debt-to-GDP ratios exploded as a result of these bailouts.
Greece stands as a stark example of where the problem was the opposite. The irresponsible Greek government wreaked havoc on otherwise conservative Greek banks, which held its sovereign debt. If (or probably when) Greece defaults, can any of the Greek banks survive?
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