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Another Big U.S. Bank Failure Could Happen, Warns Roubini

Posted Oct 08, 2008 01:39pm EDT by Aaron Task in Newsmakers, Recession, Banking

This morning's globally coordianated rate cut may have temporarily boosted the stock markets (very temporarily, it turned out), but our guest Nouriel Roubini sees more trouble ahead. Specifically, he predicts more U.S. banks failures -- perhaps even a major one.

The past few months support his case, with such stalwarts as Lehman Bros., AIG, Wachovia, and WaMu biting the dust, and in the accompanying video Roubini estimates that "a couple hundred" smaller regional banks are next in line. What about a bigger fish? The NYU Stern School economist and chairman of RGE Monitor cites the technical insolvency of Citigroup in the early '90s -- when the housing market was down a comparatively measly 5% -- as a sign that major financial institutions are increasingly vulnerable.

Wouldn't the U.S. government take just about any step to prevent such a disaster? "Eventually, a government takeover of the biggest bank in the United States is a possibility," Roubini says of Citi, thereby shoring up the economy at the expense of shareholders, creditors, and possibly uninsured depositors -- another argument for his proposal of a blanket guarantee on bank deposits.

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282 Comments

Vic
Vic - Wednesday October 08, 2008 01:50PM EDT

Please shut your mouth up Roubini.

Jose
Jose - Wednesday October 08, 2008 02:01PM EDT

Echoing the same vikatyshev.

Mike
Mike - Wednesday October 08, 2008 02:01PM EDT

Sell sell sell. Fear fear fear. Anyone intelligent out there left?

Yahoo! Finance User
Yahoo! Finance User - Wednesday October 08, 2008 02:04PM EDT

the heck with another big bank going bust I'm about to break into my piggy bank.

jetfighter
jetfighter - Wednesday October 08, 2008 02:04PM EDT

Scrow the bankes , the old fashion way, the safest place for your money would be in a safe, it may not grow. but you will not risk lossing it . and do not let any one eles benefet from it, but you. I love it

Nick
Nick - Wednesday October 08, 2008 02:09PM EDT

How does the the most powerful, economically sound country in the world create a chaos that can bring the entire world to it's knees? How did we allow our policy makers get us in this situation, we were already the most hated country, no even our allies are blaming us for ruining the worlds economy. Good job, to all the members of our senate and house, for screwing the world. You all should be very proud of yourselves, I hope that your loved ones are suffering as much as you've made the rest of us suffer and may you all go to hell for this crime that you have committed. Nice government we have.....

Nick
Nick - Wednesday October 08, 2008 02:10PM EDT

How does the the most powerful, economically sound country in the world create a chaos that can bring the entire world to it's knees? How did we allow our policy makers get us in this situation, we were already the most hated country, no even our allies are blaming us for ruining the worlds economy. Good job, to all the members of our senate and house, for screwing the world. You all should be very proud of yourselves, I hope that your loved ones are suffering as much as you've made the rest of us suffer and may you all go to hell for this crime that you have committed. Nice government we have.....

Reedersong
Reedersong - Wednesday October 08, 2008 02:10PM EDT

It is really not Funny. This is the kind of Rumbling I heard about a month before the Lehman fall. I was scrambling to try to figure out which one would fall....I was wrong, I was leaning towards WaMU, Citi, and Wachovia....I guess I eventually got the WaMU and Wachovia right,..But the Citi will not fall....Citi is way too tied into the Federal Reserve.

Nick
Nick - Wednesday October 08, 2008 02:11PM EDT

How does the the most powerful, economically sound country in the world create a chaos that can bring the entire world to it's knees? How did we allow our policy makers get us in this situation, we were already the most hated country, no even our allies are blaming us for ruining the worlds economy. Good job, to all the members of our senate and house, for screwing the world. You all should be very proud of yourselves, I hope that your loved ones are suffering as much as you've made the rest of us suffer and may you all go to hell for this crime that you have committed. Nice government we have.....

Yahoo! Finance User
Yahoo! Finance User - Wednesday October 08, 2008 02:13PM EDT

The problem with the general public is that they read into what the "experts", (Paid individuals that go on financial shows), say way too much. The networks get better ratings covering doom and gloom, not everything is coming up roses. It's a self fulling prophecy, in the fact the "experts" are saying the market is going to keep going down. The general public panic and sell everything they own.... ie the market drops 400+ points. The only people that benefit in all this is the filthy rich who can afford to purchase solid companies at low prices.

Muscle_babe0
Muscle_babe0 - Wednesday October 08, 2008 02:13PM EDT

JET..SURELY you are not suggesting people liquidate their stocks NOW?! Only a complete moron would sell at this rate! Keep ur stocks where they are and BE PATIENT!!

RobertG
RobertG - Wednesday October 08, 2008 02:14PM EDT

Mr. Roubini seems to know what he is talking about. He tells it like he sees it. In this country we need more of this straight talk. If all officials involved in this financial crisis were compelled to speak the absolute truth concering their own feelings, then just maybe we could get to the bottom of this event and find solutions.. Until the truth enters this arena this see saw market will continue. as well as the downward cycle. Where will this country financial condition be in 90 days. Not one person has the answer. Things will not improve until the Truth Serum is administered to our leaders involved in finding answers.

- Wednesday October 08, 2008 02:18PM EDT

keep tech ticker alive because they bring us the real thing . no hype but understanding keep it alive

- Wednesday October 08, 2008 02:23PM EDT

Failure of Citi would be the unintended consequence of the FDIC allowing Well Fargo to fracture the deal with Wachovia which would cost the taxpayers untold billions to bail out especially since the FDIC deposit limit was raised to 250K.

Patrick
Patrick - Wednesday October 08, 2008 02:24PM EDT

Fear is a self fullfilling prophecy, causing panic, selling at a loss, promoting even more panic and instability in the market. Long term investers should ride it out.

Yahoo! Finance User
Yahoo! Finance User - Wednesday October 08, 2008 02:29PM EDT

Mr. Roubini has been here for a long time spouting out his pesimistic outlook spurred on by Blodget. If he is so smart he would be rich and would not be spouting out all this nonsense. Tech Ticker is out to bring the market as low as possible for what reason, I know not.

Reedersong
Reedersong - Wednesday October 08, 2008 02:29PM EDT

Well..Noone talks about an equally large issue. This is the way the numbers work...Let's say the Wife and I made 90,000 last year/12 months = 7500/month X 30% = $2250. So, A loan officer would try to get us into a House that has a Mortgage payment of $2250.00/month. This amounts to a $375,000 house. I don't think taxes and insurance are figured into this unless they are figured PITI.. Let's say it's PITI, So we could get $1975/month payment plus $275 for taxes and Insurance....That is a $330,0000 house. I haven't figured in a $30,000 down payment in this scenario, but It doesn't matter....We already figured that 200,000 would be a MAX on what we could afford. The reason is 401K, HealthCare, and Higher Taxes come out of our Check Today........30 years ago...this was not the case and the banks are still using INCOME TO PAYMENT RATIOS THAT THEY USED 30 YRS. AGO. SO, The Banks and the Gov't have bled us dry and now THEY Fall as The VINE Falls ALONG WITH THE LOCUST TREE THAT IT HAS STRANGLED TO DEATH.

Mark
Mark - Wednesday October 08, 2008 02:30PM EDT

Hello Investors, I am so tired of seeing of the whole Bush's administration standing out there to wait the country fall down, obvoiusly, this is a worst administration ever in the history of the United states of America, therefore we can no longer to see this anymore, so please, please wake up Americans, I am so sorry for whoever voted for Bush at the second term, he is the one to make the whole country collapses, and hundred hundred thousands of Americans forced to leave their dream homes and to be on the street collects pennies. Again wake up, wake up, makes your voice to be heard stronger than ever, vote for Obama.

D.Volatility
D.Volatility - Wednesday October 08, 2008 02:32PM EDT

when will the nouriel roubini trade become too crowded??? Wow, should the US ban him from the airwaves??... haha blog..www.distressedvolatility.com

Yahoo! Finance User
Yahoo! Finance User - Wednesday October 08, 2008 02:32PM EDT

Give it a break you two. Is this the only guy you could find to show up on your show today I'm going to go hide in my bomb shelter now because the Russians are coming to take over the world.

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