With Southern Europe getting so much of the blame for the continent’s financial crisis, it is refreshing to see someone highlight the other side of the coin. That’s just what Joshua Rosner, managing director of Graham Fisher & Co., did in testimony on Thursday. Asked to discuss the potential risk to U.S. taxpayers of the ongoing political battle over a frayed monetary union, Fisher began his remarks by debunking the reigning narratives being used to describe the crisis:
To fully assess the risks to the United States and our proper role in the euro zone crisis it must first be clear what the crisis is and is not. It is not a bailout of the populations of the weaker European economies such as Greece, Ireland, Portugal, Italy, Spain, Hungary or Belgium. After all, the populations of those countries are being forced to give up portions of their sovereignty in the name of austerity toward a fiscal union.
Rather, I would contend, it is a bailout of banks in the core countries of Europe, of their stockholders and creditors who, failing to gain sufficient access capital markets, would need to be recapitalized by their host country governments. It is a transfer of losses from banks and corporations onto the backs of ordinary people without requiring any recognition of losses by those banks whose risk management and lending practices created the problem. It is as much a tale of over lending as it is of over borrowing and, just as nobody should feel undue sympathy for those who miscalculated the amount of debt they could service, nobody should feel for those who miscalculated their lending risks.