When I first read that the NY Fed has inquired about funding for some EU banks I obviously got concerned, just like the rest of the market. Then, this article caught my eye, regarding the level of reserve draw downs. At first it made me concerned even more. But after re-reading it, and re-thinking how important financial institutions are to the EU system, there is no way the powers-that-be will allow for a Lehman style credit disruption. (Remember that scene in "To Big to Fail" when Christine Lagarde yelled at Paulson over the phone for allowing Lehman to go under. I keep thinking of that scene.)
The more I think about how this may play out, the more I come to the conclusion that the risk will fall back to the sovereign debt as governments take on more of the burden. We will be left back to where we are, with the ECB acting as stability for the time being. That is until the EU leaders get their shit together, and come up with a viable plan to squash debt concerns.
(If that requires 50% debt restructuring, so be it. EU is at the point where they will have to bail out their banks now. The market doesn't give a fuck what their leaders say.)