Another Day of Greek tragedy (continued)

Secretary Geithner, in his interview last week with Jim Cramer, said that it was impossible that a European bank (outside of Greece) would be allowed to fail.  This is manifestly true.  The French Government is not going to let any French bank fail, nor is the German Gov't, etc.  This is easy since there is a precedent--TARP.  Although the media keeps talking about the $400 B of outstanding Greek bonds, the rescue package for European banks only needs to replenish lost capital, a small fraction of the total loss, say 10-20%.  This would allow the banks to refinance over a longer period outside of the current panic-y climate.  I very much doubt there is much exposure to Greek debt within the US banking system. 

I think there is greater recognition this week that the EU is going to have to craft a definitive plan and not just keep kicking the can down the road.  However, with 17 countries, there is always someone who is out of the loop or who wants to grandstand.  In the end, the Germans will push through what they want, even if it is a little squeaky.