Charlotte economist: Greek crisis likely to have minimal U.S. impact, unless it spreads

The Greek debt crisis roiled financial markets on Monday, but shouldn’t have a big impact in Charlotte and the rest of the United States unless it spreads to bigger European countries, a Charlotte economist said.

“The clear and present danger for the average American citizen is relatively low, but if you get into this worse-case scenario sort of world....it could become a little more dicey,” said Jay Bryson, global economist with Wells Fargo Securities.

The S&P 500 index fell about 2 percent as European officials refused to extend a bailout program after Greece’s Prime Minister Alexis Tsipras announced plans to hold a referendum on proposals made by the country’s lenders. The outcome could decide whether Greece abandons the Euro for the drachma.

Except for tourists and people with connections to the country, the crisis isn’t a huge concern for the United States because trade with Greece and bank loans are minimal, Bryson said. But if the country drops the Euro that could lead other countries with distressed economies, such as Spain and Italy, to consider the same move somewhere down the road, he said.

Greece has a relatively small 300 billion euros in government debt, mostly held by the International Monetary Fund and other European countries, Bryson said. But Italy, for instance, has 2.3 trillion euros in government debt, held by banks in Italy and other European countries.

A default by one of these larger countries could become “another Lehman Brothers,” he said, referring to the U.S. investment bank that went bankrupt in 2008, sending the world financial system into turmoil.

“The probability that we get that far I think is relatively low, and Lehman Brothers was centered here in the United States...but if the European financial system starts to blow up that will certainly have impacts here in the United States,” he said.

Worried about potential defaults, big banks have been reducing their exposure to Greece and other struggling European countries in recent years. But bank stocks still suffered on Monday, with Bank of America shares falling nearly 3 percent to $16.89.

In its latest quarterly filing, the Charlotte-based bank said its net exposure to Greece, which includes loans and securities, was $386 million as of March 31. That compares with a total of $207.8 billion in exposure to its top 20 non-U.S. countries.

“We expect to continue to support client activities in the region and our exposures may vary over time as we monitor the situation and manage our risk profile,” the bank said in the filing.

In its latest quarterly filing, Wells Fargo, which has a major employment base in Charlotte, said it has no loans to Greece itself and just $7 million in loans within the country. That compares with $64.4 billion in exposure to its top 20 non-U.S. countries.

Bank of America and Wells Fargo declined to comment.

At Novare Capital Management, a Charlotte-based investment manager, Don Olmstead, a senior portfolio manager, said he wasn’t hearing from worried clients on Monday, but that may be because the firm has been alerting them to possible volatile events in Greece.

“We’ve said it’s going to be kind of a choppy summer,” Olmstead said. The Associated Press contributed.

This story was originally published June 29, 2015 at 6:34 PM with the headline "Charlotte economist: Greek crisis likely to have minimal U.S. impact, unless it spreads."