Roubini: Nowhere near end of crisis ("We are still in the third and fourth innings,")

[RedEarth]

Source: Reuters

NEW YORK (Reuters) - Nouriel Roubini, one of the few economists who foretold much of the current financial turmoil, on Friday said the United States is nowhere near the end of the banking and credit crisis.

"We are still in the third and fourth innings," Roubini told Reuters in an interview, using a baseball analogy to drive home his view that the current cycle is only nearing its midpoint.

"And it's getting worse," said Roubini, a professor at New York University's Stern School of Business and chairman of RGE Monitor, an independent economic research firm.

On February 10, U.S. Treasury Secretary Timothy Geithner unveiled his newest bailout plan for banks, including the government's so-called "stress tests" involving all banks with more than $100 billion in capital. Regulators will analyze the banks' books far more closely than previously to see if they have the capital to endure worsening conditions.

"It is the step to form an objective way to decide which banks are illiquid and which ones are insolvent and to take over the insolvent bank," Roubini said. "We have to take over some banks."



Read more: http://www.reuters.com/article/ousiv/idUSTRE51J41220090220

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Also,

Roubini Says Europe Bank Risks Becoming ‘More Severe’ (Update2)

Feb. 20 (Bloomberg) -- Europe’s banking system faces growing risks because of losses in the region’s emerging markets, and the crisis may require a region-wide rescue effort, said New York University economist Nouriel Roubini.

“The banking problem in Europe is becoming more severe,” Roubini said in a Bloomberg Television interview. “You have a series of countries that are really in trouble,” Roubini said, citing Latvia, Estonia, Lithuania, Hungary, Belarus and Ukraine.

German and French officials this week expressed concern about a slide in investor confidence in smaller European economies. The cost of insuring Irish, Greek and Spanish debt against default has climbed to records, and mounting losses in eastern Europe among Austrian banks sent that nation’s bond-yield premiums to an unprecedented level.

European lenders are taking steps that could increase state control of banks as the recession deepens. German Chancellor Angela Merkel’s cabinet approved draft legislation this week that allows for the takeover of Hypo Real Estate Holding AG, which would be the first German bank nationalization since the 1930s.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1gMdqo.SA2c&refer=home

[Warpy]

1. Roubini knows the second shoe is dropping

and will continue to do so until mid year 2010 as all the really bad paper written toward the end of the housing bubble madness defaults.

Personally, I think quite a lot of it has already defaulted as housing prices in formerly "hot" areas have plummeted and homeowners have created jingle mail to get out from under long before now. The liar loans have also defaulted as the liars found it impossible to pay even "interest only," let alone those balloon payments that kick in over the next year and a half.

However, a lot of bad paper still has to work its way through the inflamed gut of the financial sector and I think this country will be lucky to get out of this without IMF interference.

As for the market, I fully expect it to crash through 4000 before this is over if all the right things are done, and 1000 if those old boys in Congress aren't frightened away from their cozy relationships with bankers and persuaded to do the right things.

We are going to see a massive shakeout among financial institutions, from banks and remaining brokerages to hedge funds, mutual funds and insurance giants. This is far from over.

We're all going to be badly hurt by this one. Our job is to translate that hurt into real and long lasting reforms to keep the thieves out of the financial system and back on street corners playing 3 card Monte.

[cilla4progress]

2. You know it

I wish I'd seen this coming and gotten out of my humble mutual fund portfolio - my daughter's college funds and my retirement - sooner. I'm stuck now.

Anyone who thinks we're going to get out of this without pain is blind to the truth. Even though my family and I have lived relatively conservatively and within our means, we are part of the whole and I fully expect our chickens coming home to roost as well.

At this point, if we can avoid homelessness and hunger on a broad scale to rival some other "3rd world countries," we can consider ourselves to have dodged a bullet. Disposable income, new cars, luxury vacations - all relics of the last 30 years. What shall we call it then, "the gay last quarter of the 20th century"? Wouldn't that fry some folks!

[cap]

4. how 'bout we return to a life where college tuition was something

that you could earn in the course of a summer... and everyone had some sort of pension.

[Warpy]

5. I did see it and decided to ride it out

because what I said about IMF interference is a danger I feel approaching.

People who took huge amounts of money out of the stock market last fall after the hedge funds caused the first couple of drops have caused a huge bubble in T-bills, which are now paying exactly nothing.

I can see them being able to redeem those T-bills for far less than their face value by the time this is over, outsmarting themselves.

There is no right or wrong way to go through the crash at this point, only bad alternatives to choose among. We won't know who the smart people are until it's long over.

I've always ignored the principal since I'm not going to use it to leverage debt and I'm able to live on the income while being a two bit philanthropist and amass savings. It matters little to me what the net worth numbers say at this point. It will matter very much over the next few years as the income from it begins to decline.

In the meantime, the best advice I can give people is to keep some emergency funds, about a month's worth at least, stashed someplace that requires a flashlight and stepladder to access to discourage thieves. If this gets really, really bad, that stash will come in very handy. If it doesn't, you'll still have the cash to blow at a later date.

[renate]

8. my sensible-investor friend told us the same thing about emergency funds

This was in September, when nobody knew whether or how much the government would step in to save the banks.

Still good advice when nobody knows what's coming up next. It certainly can't hurt.

[BadGimp]

9. AMEN Warpy

re: Our job is to translate that hurt into real and long lasting reforms to keep the thieves out of the financial system and back on street corners playing 3 card Monte.

A: You got that right!

[Javaman]

3. it's not just that we are in the 3rd or 4th innings, we are also down

1000 runs, with no one on base, get an automatic 3 outs when someone just looks at home plate and all our pitchers are blind quadriplegics.

[bertman]

6. At least the coach LOOKS good.

Got to love the "blind quadraplegic pitchers". Even if it is not PC.


:rofl: :rofl:

[Javaman]

7. I don't know what's with me today, I'm on a bad anti PC jag today...

I guess my Personal Coaching skills aren't what they used to be... ;) LOL