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RedEarth Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 12:47 PM
Original message
Roubini: banking system is “effectively insolvent,”
Roubini Predicts U.S. Losses May Reach $3.6 Trillion (Update1)
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By Henry Meyer and Ayesha Daya

Jan. 20 (Bloomberg) -- U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

.......

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

.......

Oil prices will trade between $30 and $40 a barrel all year, Roubini predicted.

“I see commodities falling overall another 15-20 percent,” Roubini said.


http://www.bloomberg.com/apps/news?pid=newsarchive&sid=...

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2Design Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 12:53 PM
Response to Original message
1. I just saw an article from fdic saying they were fine - need to go find it n/t
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2Design Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 12:56 PM
Response to Original message
2. Nation's Banks Are Well-Capitalized: FDIC's Bair
http://finance.yahoo.com/news/Nations-Banks-Are-cnbc-14...

The nation's banking system remains generally sound despite the doom and gloom that has dominated some of its biggest names, FDIC Chairman Sheila Bair said Wednesday.

"It was a tough quarter. We knew it was going to be a tough quarter. Banks have some real challenges," Bair said during a CNBC interview. "But I think it needs to be emphasized and re-emphasized these banks are solvent, they're well-capitalized overwhelmingly, and that really is what creditors and depositors seem to be focusing on right now."

Moreover, Bair rejected predictions in some areas that the bank industry as a whole is facing ruin, though she did acknowledge problems. She said 98 percent of all banks are well-capitalized, representing 99 percent of all assets.
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lurky Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:07 PM
Response to Reply #2
5. We have two completely contradictory statements.
I don't have the ability to evaluate the numbers they are based on, but I would be more skeptical of statements by the FDIC than those of an independent academic.

Think about it: If the FDIC came out and announced that the entire banking industry was insolvent, it would become a self-fulfilling prophecy. There would be a massive run on all the banks and probably a total collapse of the system. It would be reckless for them to announce it, even if it were true.
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2Design Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:16 PM
Response to Reply #5
7. to me roubini is promoting himself and his job and for some reason
he seems like a greenspan or a madoff to me and the article I posted seemed truth whereas the banks want more money to buy other companies and they are unable to get credit to buy without our money
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 02:13 PM
Response to Reply #7
14. You're comparing Nouriel Roubini to Madoff and Greenspan?
Get a clue!
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lurky Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 03:07 PM
Response to Reply #7
16. I'm sure Roubini is promoting himself as a top economist.
But that's a big stretch to compare him to a Ponzi operator or an ideologue using "Atlas Shrugged" as a blueprint to run our economy. And the federal authorities have a serious conflict-of-interest when it comes to telling the truth about the financial sector. Their fundamental responsibility is to keep the economy running, and that is hard to do if they admit the banking system is bankrupt. I'm not saying Roubini is right or wrong, only that I would not trust the FDIC chair to give it to me straight (especially a former Wall Street executive who was appointed by Bush).
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2Design Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 04:29 PM
Response to Reply #16
17. I don't know that I am comparing him to who they are but what their
behavior is - FRAUD - he just seems like a fraud to me - puff piece - nothing inside - like greenspan too - bush was a puff piece
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RedEarth Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 04:50 PM
Response to Reply #17
18. Roubini seems like a fraud, a puff piece?
Hasn't Roubini been pretty much spot on over the last 12 months?
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Extend a Hand Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jan-22-09 06:08 PM
Response to Reply #17
23. Roubini is an nyu stern school of business professor of economics
He was predicting this crash on his web site back in 2005 and getting all kinds of grief for his position.
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CoffeeCat Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 09:03 PM
Response to Reply #7
20. Roubini is a college professor...
...isn't he? I don't understand what he would gain by promoting an academic position. It's not like he's
a financial consultant or an advisor with his own firm. He's an academic.

Roubini is a man with an opinion, and he called these financial problems more than a year ago. He's been prescient
when it comes to predicting the mess we're in right now.

The guy knows what he is talking about.

I'm actually shocked that so many put their faith in the FDIC, no questions asked. As I mentioned in another post,
the FDIC has self reported that its ability to insure deposits was "stretched" after the failure of Washington Mutual.
That's one bank...and they were "stretched."

Do most people understand the process involved in getting your insured money returned? I admit that I don't. However,
it would be foolish to believe--without understanding the process--that your money is instantaneously recovered. We're
talking about the US government here. If there is widespread bank failures, it could take a long time before money
is returned.

A poster on DU recently reported that it took 6 months to get her FDIC-insured bank deposits returned.

I'm not saying that the sky is falling or that the FDIC is inefficient, but we'd damn well better start asking
questions and preparing for nearly every eventuality. And if the FDIC has hinted that it's nearly out of funds
after one bank failure, we need to examine exactly what that means.
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CoffeeCat Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 08:55 PM
Response to Reply #5
19. It sounds like the FDIC is doing damage control..
...and the only reason that they are saying ANYTHING is because the truth is coming out. Roubini is speaking
out about the banking system's insolvency, and so are others.

Also remember, than when Washington Mutual, the country's largest bank (at the time) failed--there were many articles
that reported on that failure, and hidden deep in those articles were a few lines about the FDIC's resources being
stretched to the brink, due to that one bank's failure.

People need to protect themselves. I don't have all of the answers, but people need to do their due diligence, and
calculate the risks of having all of their money in the banking system. They also need to ask themselves if their
bank failed and they relied on the FDIC to insure their money, would they have enough cash on-hand to survive six months.

Yesterday, a DUer reported that after her bank failed and the FDIC insured her money, it took six months to even get
the money.

The potential here is for some very, very serious situations. Are we ready for them?

How are YOU preparing?
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BR_Parkway Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:49 PM
Response to Reply #2
13. Which is why when they take over a bank, they have to have fire sale
prices on those assets at something like $40 million paid for $366 million assets purchased? Yeah, sound real secure to me. Or the FDIC is guilty of fraud and waste of taxpayer money by not getting a better value for the purchase.
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phantom power Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 12:58 PM
Response to Original message
3. Reminds me of what Atrios keeps saying...
We do not have a "liquidity crisis." The problem is that the financial industry just lost a fuck-load of money. It's gone. There's nothing to make "liquid."

I guess I don't know if they lost everything or not. I hope not, but I surely don't know.

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2Design Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:19 PM
Response to Reply #3
8. It is like a blood clot - if the blood is not flowing then there is no
cash and the rich have been taking it in hand over fist for some time now and they have it squirreled away and are very unlikely to spend it - they are like Potter and Scrooge
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Hydra Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:22 PM
Response to Reply #3
9. A lot of their "assets" were projected values
Which is why it just "disappeared"- the financial voodoo masters were spinning profits off of things that weren't there in the first place.

Without the voodoo, the housing market would have stayed on a stable growth curve instead of 10-25% per year gains...which would have meant no booming growth.
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phantom power Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:40 PM
Response to Reply #9
11. Yes, it was able to evaporate because it was never anything but data.
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Warpy Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:06 PM
Response to Original message
4. They have all dipped far below the assets required by law
to stay solvent thanks to all the toxic hedge fund paper they bought not knowing it was backed by bum loans in California and Florida.

What will need to be done as the bailout fails is to pass emergency legislation to keep them in business temporarily until loan repayment shores up their asset column to legal levels.
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Loge23 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:13 PM
Response to Original message
6. FDIC: The Fundamentals of our Banking systems are strong! n/t
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marketcrazy1 Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:36 PM
Response to Reply #6
10. slight of hand or outright lie?
"Moreover, Bair rejected predictions in some areas that the bank industry as a whole is facing ruin, though she did acknowledge problems. She said 98 percent of all banks are well-capitalized, representing 99 percent of all assets." to support the contention she said to look at the financial reports of the banks "THIRD QUARTER RESULTS" well what about the FOURTH QUARTER? you know, the quarter that had the U.S. government BAILING OUT the largest banks in America!!, the quarter wherein the FED had to inject TRILLIONS OF DOLLARS into the system to keep it from "collapsing"!! hows does data that is almost FOUR MONTHS OLD support her contention of solvency?? the fourth quarter of 08 saw the largest decline in banking in history! maybe she should look at CURRENT DATA! mark to market says they are TOAST!, oh i know, mark to market is a flawed indicator......
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dixiegrrrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 01:43 PM
Response to Original message
12. Easy enough to find out.
go to bankrate.com and look up your bank rating.
Most of the banks in my state are rated poor because they have more loans out than money to cover to losses...ie: highly leveraged.

And no, FDIC cannot possibly cover all banks..they cannot ever ever say if there is a problem, that would start a run.
But, having looked at my bank rating last year, I knew not to keep a huge chunk of money in it.
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BeHereNow Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Jan-21-09 02:41 PM
Response to Original message
15. Gold and Silver are our friends.
They will be the only things left standing when the smoke and mirrors clear.
Hard assets, the only place to put what asset value you have and want to preserve.

BHN


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OneBlueSky Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jan-22-09 09:17 AM
Response to Original message
21. I can't believe how quickly we've moved from talking about billions to talking about trillions . . .
and wondering when the quadrillion breakthrough will occur . . .
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aldo Donating Member (297 posts) Send PM | Profile | Ignore Thu Jan-22-09 02:53 PM
Response to Original message
22. Put them in bankruptcy reorganization and write off all derivatives
Save the commercial banks that run the real economy. Let the investment banks go bankrupt along with the parasite economy. Gambling debts are unenforceable, derivative debts should be also.
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