One of the more insidious aspects to the current Euro crisis (and there are so many) has been the ease with which rumors can be reported or repeated as fact. This is typical panic-mode behavior and the only weapon to combat it with is data and fact.
Last night I posted an admirable TV appearance by the CEO of SocGen who opened up about his true exposure in the face of innuendo that his bank was about to fail. And now we get some reality on the money markets situation that I brought to light yesterday from the International Finance Review. Here’s HSBC’s Elie El Hayek on the stress in that market:
“Clearly there are some issues on dollar funding for certain banks, but we do not see this getting out of control like in 2008. Central banks have tools to ease conditions if it starts to get tricky,” said Elie El Hayek, global head of rates at HSBC. “The ECB offers dollar at 100bp above fed funds at the moment, and they can lower that level if need be. You can pledge any collateral to get those dollars, so banks can theoretically access practically unlimited funding in dollars.”
So yes, there is clearly some stress there, but we are certainly not talking about a “freeze-out” or “non-existent” funding or anything like that. Hopefully this can be avoided and we can contain the pain to the equity side. The key here for Europe will be to maintain liquidity, should they lose control of that we’ll be into a new phase that is best discussed by Chief Global Strategist types.