A few more thoughts on yesterday afternoon’s blog that noted Wednesday’s selloff was Eurocentric can be found in an excellent article in the New York Times.
The NYT piece details the efforts of the Fed to determine how American banks would fare if European banks experienced significant liquidity issues. Contagion didn’t seem to be an issue, unless Italy ran into problems. And that is exactly what started last week, as traders abandoned both the Italian and Spanish bond markets. ECB intervention helped calm fears, until yesterday’s panicked route of French banks.