“Anti-American” bank safety issues.

There were a couple of bank safety issues in reports on today’s Huffington Post.

One suggests fears of the impact of the European debt crisis on American banks are overblown with only two banks exposed.  I am a skeptic.  Anytime a bank loses money the loss is likely to reduce the money supply which makes the exchange of goods and services more difficult.  It is hard to see that a major bank crisis in Europe would not be felt in North America.

The other item quotes the chief executive of JP Morgan Chase as saying new international capital requirements for banks are anti-American.

Once again I am skeptical.   In this case anti-American probably means anti-the short-term interests of the large banks. (His bank was one of the two named as being exposed to the European debt crisis.)

In normal circumstances the lower the reserves kept by banks the more they can loan out and the greater their profits.  Reserves are required to protect the bank against heavy defaults on money loaned and the prevent a run on the bank.

Considering the current state of the world economy we should be asking if reserves are high enough.

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