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Worst of Banking Crisis Won't Hit Until 2009, Says Top Risk Analyst

Posted Nov 19, 2008 07:00am EST by Aaron Task in Investing, Recession, Banking

Christopher Whalen, managing director of Institutional Risk Analytics, was hailed by Fortune as one of the "Prophets of the Credit Crisis" for seeing danger long before it was obvious to most.

But Whalen is no permabear and he does see some signs of hope on the horizon for the financials. The "vast majority" of banks remain healthy, he tells Henry in the accompanying video, and also predicts loan losses will peak in the second quarter of 2009.

Since banking stocks typically rise in anticipation of peak losses, you'd think Whalen would be an eager buyer. Well, not quite. He might not be a permabear but he's far from bullish on the sector, citing:

  • The possibility industry loan losses may remain at those "peak" levels for several quarters.
  • Banks continuing to focus on raising their loan loss provisions (see above) vs. extending credit to customers.
  • The likelihood of rising problem loans in the prime, high-yield, and corporate categories.

While particularly concerned about Citigroup and JPMorgan, as detailed here, Whalen says financial stocks are going to remain a "dead weight" for the major averages well into next year.

(Note: Whalen currently has no position in the banks he and Henry discuss.)

54 Comments

Anthony
Anthony - Wednesday November 19, 2008 09:33AM EST

The Rothschilds want us all to be their debt slaves. See the movie Ring of Power or bloodlines of Power or Empire of Cities (they are all the same on youtube). Stop paying your credit cards, stop paying your mortgage and take the money out of your bank and your 401k.

enough
enough - Wednesday November 19, 2008 09:38AM EST

Until the Federal government who is loaning "billions of Americans tax dollars," steps in and demands to have some oversight on who is actually receiving these funds, this financial nightmare will continue. Paulson lied, yes lied to the American people and now he has controll on huge somes of money and how it is spent. It seems ludicrous to me that he gave billions of dollars to banks, who did not need it. Banks who do need it are being bought up by the banks who did not need the money and got it anyway. Then he has the unbelievable gaul to say we should not bail out the auto manufacturing industry. People who receive pensions did nothing wrong, and all pensions should be insured by the American government. Regarding trusting Wall Street, these guys were recommending AIG and well all know what happened to that one. They ask to be bailed out and then we find them taking lavish vacations, and going to dinner at upper scale restaurants. Seems to me the bulk of them should be thrown in jail. Americans are tired of the constant BS that they are receiving. It is time to say enough, stop usiing the American Credit Card, it has reached it's credit limit. Wake up stop the forclosure crisis, and let the guys that came up with these ridiculous lending schemes go down the toilet...

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 09:46AM EST

The government doesn't want you to know the real truth, but the reality of this economy is we are going into the next great depression,look at history. 2009 will be horrible and our market will collapse, sorry to be so negative but someone has to say the d word.

WILLIAM
WILLIAM - Wednesday November 19, 2008 09:53AM EST

WE ARE A SOCIETY OF ENABLERS. WE, ALL OF US, ALLOW CITY WORKERS, AUTO WORKERS, ALL UNON WORKERS TO CONSPIRE AND THREATEN US WITH STRIKES IF THEY DON"T GET RAISES, MORE HEALTH BENEFITS, BIGGER PENSIONS...AND WE GIVE IN...WE ALLOW BUSINESSES AND GOVERNMENTS TO GIVE IN TO THE SCAM. WORSE YET ARE THE LAWYERS WHO NEGOTIATE WITH THE BIGGEST CRIMINAL ELEMENTS OUR SOCIETY...OTHER LAWYERS...TO GIVE IT ALL AWAY. I HATE WHEN A BABY DIES AT BIRTH, BUT DID THE INSURANCE COMANY HAVE TO PAY ANYTHING TO PROTECT THE CHILDAND MOTHER BEFORE BIRTH..OR JUST AFTER WHEN A SUING THE DOCTOR,HOSPITAL,DRUG COMPANY ETC. IS ALWAYS A BIGGER PAY DAY FOR THE CLIENT AND THE LAWYERS. THERE IS SOO MUCH WRONG WITH OUR GOVERNMENT AND OUR SOCIETY FOR ONLY ONE REASON...WE ALLOW IT.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Wednesday November 19, 2008 10:04AM EST

Is there a prophet of hope instead of all scary........

j29455278
j29455278 - Wednesday November 19, 2008 10:12AM EST

Will sombody tie that guy's hands together so he can't wave them around? It's as if a producer told him to appear animated, and he's overdoing it.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Wednesday November 19, 2008 10:20AM EST

Investors dont trust obamanomics !!!!!! face it

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 10:28AM EST

I was born 1929.My whole chilldhood was deep depression era tho my parents were very hard workers and suffered to feed their children .IIf you did not go through it.You cant imagine it. University grads ,small businessmen,all hungry.No one except the very wealthy or Govt. workers could see a dentist or doctor.They required cash up front.My 8 year old brother was hit by a car when he and I exited a church.A car crossed the sidewalk making a turn.The driver dumped us at a major city emergency hospital at 7pm.My parents came by streetcar.Unable to prove they could pay,not owning a home to lien they had to go by streetcar back to our neighborhood and get a friend,a fireman, who could prove he could pay and return to the hospital by streetcar before a doctor would examine the patient waiting on a wooden bench in hospital lobby.Compound leg fractures.Fortunately not internal organ injury; but from 7PM until after 2am when the money was pledged no one gave a damn.needless to say I saw a doctor and a dentist when I earned enough money.I was manageing a restaurant and cooking 250 breakfasts at a train station at age 13.Starting pay : $0.38 PER hour.Worked my way thro University.The only job in my field after a 6 month search,I was told "we dont hire women".Why? It upsets the men.They hired a South American Immigrant from my Univ.class who was near the bottom in achievment.Get your head ready if we are really going into a depression;if you are under 75,you have no clue what it can be like if there are no social programs to help.If there is no money to fund them they will effectively disappear.Keep some money for that time .Roosevelt and WW2 finally added an egg and hamburger to white bread and peanut butter for the American worker.You make a mistake if you think this story is about lazy,uneducated losers.Its about people just like you. we all need to be aware of whats going on politically and financially.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 10:46AM EST

How can the banks come good if the same idiots are in charge. These CEO's are still high on irrational greed. So how can they make sound decisions? But no, PC demands losers be protected from failure - with our $700b plus.

JARAA
JARAA - Wednesday November 19, 2008 10:49AM EST

you couldnt know its a trend until even a year has passed. if earning go up then drop then the price will just be back to where it was.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 10:54AM EST

You got a crook like Blodget advising us how to stay alive in a situation created by other crooks. WTF??!! How about taking back those millions in bonuses that was given to those crooks at Wall Street the last few years, millions given to them for making bets with money they never had. The way those crooks are screwing the ordinary citizen and getting away with it, I won't be surprised if some Joe lost everything starts going loco with a shotgun and a assault rifle at Wall Street.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 10:54AM EST

You got a crook like Blodget advising us how to stay alive in a situation created by other crooks. WTF??!! How about taking back those millions in bonuses that was given to those crooks at Wall Street the last few years, millions given to them for making bets with money they never had. The way those crooks are screwing the ordinary citizen and getting away with it, I won't be surprised if some Joe lost everything starts going loco with a shotgun and a assault rifle at Wall Street.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 10:55AM EST

You got a crook like Blodget advising us how to stay alive in a situation created by other crooks. WTF??!! How about taking back those millions in bonuses that was given to those crooks at Wall Street the last few years, millions given to them for making bets with money they never had. The way those crooks are screwing the ordinary citizen and getting away with it, I won't be surprised if some Joe lost everything starts going loco with a shotgun and a assault rifle at Wall Street.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 11:00AM EST

Johnny Ike - "prophet of hope?" The internal government debt is $53 trillion dollars. That more than half a million dollars per household (2.3 people per household). If you include federal employee pension obligations, that's another $50 trillion. The federal government has to borrow $2.4 trillion for this coming year to pay its bills. This is Freddy Kruegger in real life. There is "hope" if you look away from reality, and withdraw into a fantasy La La world. Or keep going to the movie theater.

__A_YAHOO_USER__
__A_YAHOO_USER__ - Wednesday November 19, 2008 11:18AM EST

So all the prophet now is bad prophet.......That is why.........many are getting psycho............sad..............in fantasy world there is no psycho........All are happy people........No problem.......no enemy...... Thank for good education about reality......Men it too big debts......In fantacy there is oil and gold...........thank you......

lawrences
lawrences - Wednesday November 19, 2008 11:27AM EST

Crime pays.

Matthew M
Matthew M - Wednesday November 19, 2008 11:38AM EST

dont wory Obama will fiks the econimee

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 11:49AM EST

Any small, medum and big banks that have not fallen yet will fall within the next 1 - 2 years IF they concentrated on pumping out option ARM mortgage loan for the last 2 - 3 years. A lot of mortgage-concentrated banks such as Downey Savings are waiting on the death row. The core problem is there are too many incompetent, inexperienced banks in the US all struggling to make money out of three limited sources - credit cards, auto loans and mortgage loans. My personal opinion is the number of US banks must be reduced to less than five or four. Simply, there are too many small and medium banks.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 19, 2008 11:55AM EST

Yes, Obamassiah will fix every thing, and we will all live happily ever after.

JerryM
JerryM - Wednesday November 19, 2008 12:08PM EST

Stop paying on your mortgage? Great advice Alex ! When do they come for the children?

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