US bank 'to fail within months' - BBC

BettiePage

http://news.bbc.co.uk/1/hi/business/7569903.stm

The global financial crisis is set to get worse, with a large US bank likely to collapse in the next few months, a former IMF chief economist has warned.
Kenneth Rogoff's comments came as shares in Fannie Mae and Freddie Mac sank on a report that the home lenders would, in effect, be nationalised.
Despite hopes that the US economy had turned the corner, Mr Rogoff claimed it was "not out of the woods".
"I would even go further to say 'the worst is to come'," he said.
"We're not just going to see mid-sized banks go under in the next few months," said Mr Rogoff, who held the IMF role between 2001 and 2004.
"We're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks."

We have to see more consolidation in the financial sector before this is over


Kenneth Rogoff

Speaking at a conference in Singapore, Mr Rogoff, now an economics professor at Harvard, forecast that Fannie Mae and Freddie Mac would "probably" not exist in their present form in a few years.
"We have to see more consolidation in the financial sector before this is over."
On Monday, shares of Fannie Mae fell more than 22%, or $1.76, to close at $6.15. Shares of Freddie Mac fell almost 25%, or $1.46, to $4.39.
'Wrong move'
Shares in Freddie and Fannie first fell sharply last month on fears that they would run out of money to fund their business, forcing the US government to take radical steps to ease the panic.
The two firms are the backbone of the US mortgage market as almost all US lenders rely on them to buy their mortgages in order to access the funds to lend to consumers.
As mortgage guarantors, they must pay out when homeowners default on their loans.
With the housing market across the US crumbling, their finances have come under severe stress.
Problems in the US housing sector prompted the Federal Reserve to slash interest rates to 2% earlier this year.
But Mr Rogoff said the Fed was wrong to cut interest rates as "dramatically" as it did.
"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States," he added.

:eek:

lynzpower

Any guesstimate about which bank its to be Betty?

WTF?_2

Will it be Merryl, will it be Citi? You'll have to wait and see.....
Que Sera Sera, whatever will be will be....

lynzpower

If it is Citi, what impact, out of interest would that have on Citi users here? I mean lots of store cards are Citi I understand - help me out - what impact here? ( aside from the general fall out of the bank and the international reverberations)

Cranston_2

My guess is, if it happens it will be Citi.

I expect the Fed will nationlise it like we did with Northern Rock

mewbie_2

It is extraordinary how once these bankers leave their positions their whole tone changes. They change from quiet grey people who use subtly nuanced expressions to hint at a possible easing of this, or a minded to tighten that - into full on raving HPC'ers who seem to be dreaming up the next headline in order to screw the lucky so and so who took on their previous job.

moneymass

mewbie wrote: »

It is extraordinary how once these bankers leave their positions their whole tone changes. They change from quiet grey people who use subtly nuanced expressions to hint at a possible easing of this, or a minded to tighten that - into full on raving HPC'ers who seem to be dreaming up the next headline in order to screw the lucky so and so who took on their previous job.

Harvard probably don't pay him to spin.

CYBERCIDERSAVER

Cranston wrote: »

My guess is, if it happens it will be Citi.

I expect the Fed will nationlise it like we did with Northern Rock

What the great capitalist economy of the US of A would NATIONALISE a bank????

But I thought David Cameron said nationalising a bank was not the right thing to do. In fact didn't he prefer to let Lloyds buy it and extend the benefit of the governments loan to N Rock to them. ie Allowing a private co. to sponge of the state! Got enough spongers in this country as it is without having major banks doing the same!!

Generali

lynzpower wrote: »

If it is Citi, what impact, out of interest would that have on Citi users here? I mean lots of store cards are Citi I understand - help me out - what impact here? ( aside from the general fall out of the bank and the international reverberations)

Normally banks don't really fail - either they get bought out for a nominal amount (like Barings for example) or they are nationalised.

If they are bought then the new owners will try to make money from what they've bought. Usually this means sacking the old managers and a good proportion of the staff. Increasing prices a little (jacking up interest rates on debt and reducing them on savings).

If they are nationalised then one of 2 things seem to happen as a rule:

1. Let the insolvent bank sort of hobble along in an 'As you were' kind of fashion with the taxpayer soaking up the losses year after year. This could be called the Japanese model.

2. Slim down the bank as quickly as possible by getting rid of borrowers as fast as you can. Put in some cash to recapitalise and then privatise it as soon as is practical. This could be called the Scandinavian model and appears to be what the Govt is trying to do with NRK.

If Citi fails then there is going to be a big mess to clear up afterwards. The same goes for Merrills (possibly a more likely candidate for failure IMO) or any other big US investment bank.

Where it gets really interesting is when you look at CSFB and UBS. AFAIK, between them they have far more in liabilities than the annual GDP of Switzerland.If one of them goes bust (UBS) then who can or will bail them out?

amcluesent

The US plunge protection team have been running the printing presses non-stop for a year, trying to reflate away the risk of a systemic banking failure, all be it with the unfortunate side effect of pauperising American middle-classes with $ savings.

Ask yourself, who benefits and who has the means to reverse the long-term devaluation in the $ and engineer the sudden turn-around in the $ and have gold drop below $800?

It looks to me like the final stitch-up between the Saudi royals and George Bush to allow 'their people' to take every asset off the table before the $ totally fails as a reserve currency. Of course, the Russians have jumped the gun on America's collapse by invading Georgia and laughing at the posturing from end-of-empire America.

There is a once in a generation opportunity to protect your wealth, don't believe a word of the spin coming from the controlled media like the BBC, with the drip-drip-drip of news to avoid frightening the sheeple. If it's no worse than 1973-79, we'll be very lucky, an 1930's style Great Depression is more likely. Your fiat currencies and share certificates will have a use - to light the fires we all huddle around after the power goes off!

WTF?_2

amcluesent wrote: »

Ask yourself, who benefits and who has the means to reverse the long-term devaluation in the $ and engineer the sudden turn-around in the $ and have gold drop below $800?

errr, the Stonecutters perhaps?




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