We are writing today to express our concerns over the exposure of U.S. financial institutions to a Greek or other European country default. Our worries stem from a recent report published by the Bank for International Settlements (BIS) that shows what appears to be nearly $200 billion in direct and indirect exposure from U.S. firms to the debt of Greece, Ireland, and Portugal. We would like to understand how American financial institutions, and by extension the American economy, would be impacted by a default of one or more of these countries.
As you know, with credit default swaps the details of a default "trigger" and how the derivative contract is written matter a great deal. Because of this it is very difficult to know from the BIS's aggregate numbers what levels of exposure U.S. firms have to a particular event with Greek or other European debt. As such, we are writing in part to ask the Federal Reserve for more granular information and to request that you keep Congress regularly informed of any new developments.
Because of the profligate mistakes of banks, regulators, and those who took on too much debt, Congress was asked to provide emergency financial assistance to American banks in 2008. It is our sincere hope that the proper lessons have been learned and that we will not be faced with an unacceptable set of options ever again.
Bob Corker, United States Senator
Tom Coburn, United States Senator