Roger Altman, chief executive of private equity titan Evercore Partners, says the U.S. faces a sluggish rebound from recession.
As a result, more fiscal stimulus will be necessary, which of course means huge budget deficits, Altman writes in the Financial Times.
In addition, banks will require another round of recapitalization.
“The rare nature of this recession precludes a cyclically normal U.S. recovery,” he argues.
“Instead, we are consigned to a slow, painful climb-out, as are nations such as Japan and Mexico that depend on U.S. demand.”
Altman says policy implications “include a likely second round of stimulus, much more federal capital for the banking system and stunning budget deficits that will slow key initiatives for President Barack Obama, such as healthcare and energy reform.”
Households will be slow to recover, as home prices fall through the middle of next year, he says.
“And there is no precedent for equity markets, still down 45 per cent from their peak, to make those losses up in just two years.”
Result: “It is illogical, therefore, to expect a full snap-back in the consumer sector in 2010 or 2011,” Altman says. “This alone mandates a drawn-out, weak recovery.”
Add to that probably $1 trillion in as yet unrealized bank losses, and you have another reason for slow recovery, he points out.
Other experts forecast slow recovery too.
“We are not out of the woods yet,” Federal Reserve Vice Chairman Donald Kohn said in a recent speech.
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