Moshe Orenbuch, a bank analyst for Credit Suisse, said on CNBC that the only reason that US banks are so closely correlated to Euro banks is investor psychology.According to what the market is preparing for (Check out the graph of Morgan Stanley vs Deutsche Bank over the last 3 months —>), at least some US banks could suffer the same disastrous consequences of a messy Euro event as their their Euro counterparts. But Euro banks are rumoured to be preparing for that by moving towards a coordinated recapitalization. At least there’s been serious discussion about it. The same has not appeared to happen in the US.
Orenbuch explains why (the video is below)-
“The reality is that banks are in a better capital position than they were going into the crisis, and that US banks are have better liquidity than Euro banks,” he says. He hopes banks will approach trading levels at their book values.
They should because “US banks, they do all believe that their actual exposures are hedged and collateralized. Now if the whole system falls apart, then there could be some issues, but I just don’t see that happening.”
He explains why -“It’s clear from a policy standpoint” to him that “that can’t happen again” but he can’t “sit here and guarantee that.”
“Investor psychology is in play here,” he said, pointing to the “issues around fears in Europe” and people “assuming it will happen again.”
Orenbuch works with Howard Chen, the analyst who wrote the Credit Suisse analyst report that Morgan Stanley CEO James Gorman pointed employees to in the morale-rallying memo he sent on Monday.
So of course CNBC also asked him about the Zerohedge article that says Morgan Stanley has $39 billion in exposures to French banks. Now, an analyst note we were pointed to apparently says that the firm decreased its exposure to $21.6 billion since then (the data was from MS’s 10K as of December 31 2010).
Here’s what he had to say about that –
“Howard Chen believes Morgan’s liquidity and exposures are management.”