Could a banking crisis like the one taking place in Cyprus ever happen in the good-ole U.S.A?
Rep. John Campbell, chairman of the House monetary policy and trade subcommittee of the House Financial Services committee, tells MarketWatch that he certainly hopes not. However, he says the crisis, which includes a controversial levy on bank deposits to pay for a bailout of the country, puts a spotlight on those who say the U.S. needs to get its fiscal house in order.
"This is what those of us who have been so aggressive about our debt and deficit have been worried about," Campbell said. "Obviously Cyprus is at the extreme end of this problem. If you wind up in a debt crisis, it doesn't matter if it is Cyprus or us, where you cannot finance your debt, there are any number of actions that a government might take at that point and they're all bad."
The Orange County, Calif., Republican argues that the only way to ensure that something like what is happening in Cyprus never happens in the U.S. is for the U.S. government to get its debt situation under control. Doing so would also set a "good example" for other countries, such as Japan or Italy, so they also get their fiscal houses in order, he said.
Campbell said he has been closely monitoring the situation over the weekend, noting that it is the first time anyone has suggested a solution like a deposit levy. However, he has yet to schedule any hearings on the subject for the subcommittee. He noted that there doesn't appear to be any runs on banks in continental Europe as a result of the Cyprus crisis, but "you have to keep an eye out."
"There is no question that it is a little bit of a scary solution because of the possibility of contagion but this is what happens when you don't get your debt situation in order," he said. "My concern is that Europe has not yet dealt with the fundamentals of their problems."