Professor Edward Kane:

Completely unfit is a very strong term. As of where we are today, the cross-country contracts - if one wants to think of them as contracts - are very incomplete. One can really see this in the other area of the swaps regulation because that is where it stands out the most. Every country that has an important swaps market wants to be able to do whatever it wants to do. It wants the other countries to recognise their regulatory authority over the nationals of the foreign countries trading. Then one is trading on their platforms. The dangers of this, especially for countries like the United States, is that the United States will end up having to cover losses incurred in other markets. This is what happened with England. I mentioned a firm called the American Insurance Group or AIG. The losses surfaced in trading in England by a French subsidiary of this firm and this little subsidiary created a large portion of its losses. We are so far from having arranged what I would call an adequate or complete contracting of who will do what in a crisis, across countries, that it is frightening as to what could occur.

I sometimes use a cartoon that shows the ECB, Germany represented by Angela Merkel, and the IMF throwing money first at somebody wearing a Greek toga and then behind that there are hands of five other countries that are in trouble, including Ireland, scrambling to get some of the dollars. Then the IMF turns around to Uncle Sam and says, "Do you realise that if this doesn't work we are going to be calling on you?" That is the way the system is set up.