While all eyes are glued to Greece, whose financial woes could melt the Euro (not to mention the Gyro), one banking big wig is focused on an economic mess that makes Greece's problem seem like a souvlaki picnic comparison. The sovereign state he's concerned about? California!

Jamie Dimon is chairman of JP Morgan Chase, which when it is not being rescued by American taxpayers, tends to be a pretty savvy observer of the world economic scene.

Dimon, reported Britain's The Telegraph, warned investors at the bank's annual meeting that they need to be more worried about California defaulting than about Greece.

Dimon says the bank doesn't see the European Union "coming apart." And, he says, Greece does not present a problem for Chase or other banks, because the risks have already been hedged. But California is a different matter.
For one, California's economy is five times the size of Greece. (Depending on which set of statistics you believe, California, if it were a nation instead of this country's most populous state, would have the 7th or 10th largest economy in the world). While the Greek economy represents less that 3 percent of euro-zone GDP, California accounts for about 13.5 percent of US GDP. California can single handily screw up any hopes of a meaningful national economic recovery here!

Unfortunately, the state is a financial disaster. The Golden State is facing a budget deficit of about $40 billion this year -- roughly $10 billion shy of Greece's projected budget deficit. Dimon warns that "there could be contagion" if California had problems repaying its massive debt.

The real estate market in California, many experts believe, will largely be the determining factor in it's financial health. California, along with Florida, Arizona and Nevada, has been hit hard by the housing bubble bust. While some communities have shown signs of slightly increased home prices and sales, for the most part, the state is still a foreclosure basket case, with many, many more homeowners facing foreclosure in the months ahead.

The unemployment rate for the state is also higher than the national average, and jobs are still being shed here. The state's largest city, Los Angeles, is facing more than 4,000 layoffs of city workers. Without a recovery in employment there is little hope for a recovery in housing.

When you add it all up, you can see why Dimon is worried about California more than Greece. This ain't no stroll in Golden Gate Park.


Charles Feldman is a journalist, media consultant and co-author of the book, "No Time to Think: The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years.