Ben Bernanke updates America on the status of our economy, interdependence on Europe, and what may ensue if Greece and the rest of the Europe’s sovereign debt and banking issues aren’t resolved in an orderly fashion. (Hint: They won’t be, so get ready for the worst case scenario) :
First it would depend on the conditions of the default. If it were done in a way that was, where there were very substantial firewalls, backstops, protections done in a very orderly and controlled way, then that would be one thing.
If it was disorderly, unplanned and disruptive that’d be a very different matter.
As I said to Congressman Brady, the direct exposures of our banks to Greece are minimal.
If there were a disorderly default, which led to, for example, runs or defaults of other sovereigns or stresses on European banks, it would create a huge amount of financial volatility globally that would have a very substantial impact not only on our financial system, but on our economy. So, it’s a very, very serious risk if that were to happen.
Ben Bernanke, the architect of our economic recovery, just told us that the worst case scenario will have a “substantial impact” on our financial and economic systems. We’re to the point where Mr. Bernanke is now talking about bank runs in Europe, and Congress is concerned of similar situations playing out right here at home.
In his words, not ours, there is a very serious risk to our economy if Europe doesn’t resolve its problems. Based on the non-resolutions for the last two years, you can be assured Europe will not resolve its problems. Greece is going under, it will not be orderly, and all of Europe is going with it.
Video Excerpts below or view the full two hour testimony at C-Span: