An interesting problem will be facing the Fed in a few months.
If we assume the problems in Spain, Italy and Greece are too big for Europe to bailout, then you would think we are headed for a partial default on those countries bonds. If that happens, it seems logical that at least one ‘too big to fail’ will be taken down – it seems hard to believe that MF Global is the only financial institution that made a bet on high yield european bonds.
Sounds like maybe Ben is well too aware of this – and bailing out US Banks again will cause unrest like we have never seen. His only choice is to try to cloak it as an international initiative.
11/23/11 UPDATE – Looks like the Fed wants to know how much they have to push to save the euro and thus save the banks.