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Fed worried about European banks
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Fed worried about European banks

Dow plunges in morning trading

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Remember the darkest days of 2008, when the big worry around the world was that the global financial system would freeze up? 

Well, step out of the time machine dear reader.

We may be approaching that dangerous territory again.

According to Thursday's Wall Street Journal, the Federal Reserve is concerned that the euro zone debt crisis could "eventually hinder the ability of European banks to fund loans and meet other financial obligations in the U.S."

So the New York Fed — the regulatory body responsible for overseeing European banks in the U.S. — has been scrutinizing the U.S. operations of Europe's troubled banks, the Journal reports.

Here's how the WSJ puts it:

The Federal Reserve Bank of New York...recently has been holding extensive meetings with the lenders to gauge their vulnerability to escalating financial pressures. The Fed is demanding more information from the banks about whether they have reliable access to the funds needed to operate on a day-to-day basis in the U.S. and, in some cases, pushing the banks to overhaul their U.S. structures, the people familiar with the matter say.

Officials at the New York Fed "are very concerned" about European banks facing funding difficulties in the U.S., said a senior executive at a major European bank who has participated in the talks.

Regulators are seeking to avoid a repeat of the 2008 financial crisis, when the global financial system began to seize up. This time the worry is that the euro-zone debt crisis could eventually hinder the ability of European banks to fund loans and meet other financial obligations in the United States. While signs of stress are bubbling up, the problems aren't yet approaching the severity of past crises.

U.S. stocks were sharply lower Thursday morning, as the Dow plunged.

European stocks are also having a very bad day, with Germany's DAX now down almost 6 percent, and the Paris CAC 40 down 5.5 percent.

This article originally appeared on GlobalPost.

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