Is Europe Looting the U.S.?

With a recent acceleration of bank failures over recent weeks, the financial landscape is changing as mega banks from Europe set up shop on U.S. soil.

Author:: Guest Contributor
Publish date:: Sep 8, 2009 12:09 PM EDT

The following post comes to us from Jared MacLane of Marginal Trends.

NEW YORK (

TheStreet.com ) - It's an interesting question as the "not-too-big-to-fails" continue to vanish. There has been an acceleration of bank failures over recent weeks. They won't top the Savings and Loan crisis of the 1990's, but nonetheless the landscape is changing dramatically as the mega banks from Europe set up shop on U.S. soil.

Spanish bank BBVA is the most recent example of this expansion. They scooped up Guaranty Financial, extending their reach in the south and Sunbelt region of the U.S. France's strongest bank, BNP Paribas has control of Bank of the West- the fifth largest bank in California- covering nineteen states. England's Barclays Capital bought the healthy businesses from Lehman Brothers last fall.

UBS

(UBS) - Get Report

ING

(ING) - Get Report

HSBC

(HBC)

, and Credit Suisse have a presence here and continue to build their coffers by poaching from Citigroup, Morgan Stanley and others.

The likes of

Wells Fargo

(WFC) - Get Report

and

J.P Morgan Chase

(JPM) - Get Report

show relative strength, but

Citigroup

and

Bank of America

(BAC) - Get Report

, who are essentially owned by the Government, are limited as to how they can operate. Many large U.S. firms are tapped out or sitting on the sidelines, and there is little sign of improvement as foreclosure rates climb, and mortgage companies responsible for home loans disappear. Capital could be further strained thanks to FASB accounting changes coming in January. This leaves plenty of room for sturdy foreign banks to stockpile busted banks and financial companies.

Profits over the next few quarters will be slow at best. Banks will concentrate their efforts on boosting capital requirements by expanding their deposit base. Expansion may come via acquisition, but not if Europe gets there first.

The long term consequences of Europe's spread into the U.S. market may turn out to be harmless, but at the same time the demise of the home-based bank puts a strain on the strength and power of our country. I just hope Washington is paying attention.

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