U.S. Banks Seek European Deals, Don’t Pause to Thank U.S. Regulators

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.”

[Cross-posted at The Reality-Based Community]

Andrew Sabl

Andrew Sabl is a Visiting Professor in the Program on Ethics, Politics, and Economics and in Political Science at Yale University.