Will the US be the next Cyprus?

Dean Baker raises concerns over the big banks in the US.

Many highly-respected Washington types have been running around for the last three years yelling that because of its large budget deficits, the United States is Greece. Then we learned last week that the immediate danger is the United States being Cyprus...

As the Cyprus crisis was unfolding last week, we also got to see the report of the Senate Permanent Subcommittee on Investigations (pdf) on JP Morgan's losses at its "London Whale" trading division. The report chronicles a series of bad bets on derivatives that were compounded by traders doubling down their stakes. They concealed the size of their losses both to bank officers and regulators. The end result was a $6bn loss...

If the regulators were not able to catch the London Whale's huge gambles before they went bad, why would we think that they will catch the next crapshoot from the Wall Street gang?

Meanwhile, though, the US economy appears to be maintaining some positive momentum for the time being despite some mixed economic data on Tuesday.

Durable goods orders jumped 5.7 percent in February, more than reversing January's 3.8 percent decline. Orders for non-defense capital goods excluding aircraft fell 2.7 percent but this came after a 6.7 percent jump the previous month.

New home sales fell 4.6 percent in February. However, this followed a 13.1 percent surge in January. The combined January-February sales performance was the best two-month showing since August and September 2008.

In another sign of an improving housing market, data from S&P/Case-Shiller showed that home prices in 20 US cities increased 8.1 percent in January from the same time last year, the biggest 12-month gain since June 2006.

However, the Conference Board’s consumer confidence index plunged to 59.7 in March from a three-month high of 68 in February.

Still, the overall trend of the economic data in recent weeks indicates that the US economy continues to grow.