In an interview with CNBC from the Davos World Economic Forum, JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon said that the impact of a Greek default on US banks would be “almost zero.” Maybe that’s true for someone at Dimon’s pay grade, but his declaration is at least arguable.
Dimon also said that the impact of having to pay out credit default swaps on failed Greek bonds is “very small in Greece and I don’t think it’ll be that big a deal.” He also said that the failure of Italy and Spain are “the real issue.”
In its quarterly report for the third quarter of 2011, published in November, the Bank of International Settlements (BIS) estimated the value of derivatives on European debt at $476 billion. This figure was disputed by the US banks, which prefer to net out their exposure over their entire portfolio. They came up with a figure of about $50 billion.
US banks are believed to hold more 50% of all derivatives tied to European debt. Even Dimon would notice a payout of around $280 billion — or $25 billion for that matter. Dimon is undoubtedly correct in his belief that Greek debt is a very small part of that. But if Greece goes, that big bet’s odds suddenly get a lot worse.