On the third anniversary of the Lehman Brothers bankruptcy, central banks are once again coming together to avoid a rehashing of a similar collapse within the European banking system that would be brought on by the long-standing problems in Greece. Three years later, fear lives on, as does the larger debt problem affecting sovereign debt in the Eurozone. Yesterday, the European Central Bank announced three additional rounds of stimulus in hopes of relaxing market tensions.
The United States Fed, the Bank of England, the Bank of Japan and the National Bank of Switzerland all collaborated on the decision to flood the markets with cash. This state-assisted plan precipitated a stock market rally.
Greece's problem and the infuriating delays in finalizing a plan for its future have exposed the banking sector to not only losses associated with debt forgiveness, but also the demanding scrutiny of the markets, which are desperate for concrete reasons to balance out.
With yesterday's aid packages, the EU has done little more than try to buy time for the banks to recapitalize. But doubts about whether the Greek economy will fail are clouding the distant horizon for banks tied to Greek debt. The uncertainty is unbearable. Trichet and Bernanke acted correctly by reaching this resolution. But we still need cooperation and understanding from the rest of the global, because that could calm the markets.
