Nouriel Roubini, the economist whose accurate forecasts of economic turmoil have earned him the moniker Dr. Doom, sees huge bank losses on the horizon.
“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai.
“If that’s true, it means the U.S. banking system is effectively insolvent, because it starts with a capital of $1.4 trillion,” Roubini says.
“This is a systemic banking crisis.”
Losses by financial institutions around the globe already have surpassed $1 trillion since the outbreak of the subprime mortgage crisis in July 2007, according to Bloomberg data.
Roubini told Bloomberg that President Obama will have to inject up to $1 trillion into the banking sector to avoid collapse, on top of the $350 billion the government already spent to recapitalize banks during the Bush administration.
Others see a need for more government aid too.
“When you order dirt to put in a hole and you empty the dump truck and the hole still isn't full, you've got to order another truck,” Robert Brusca, head of FAO Economics in New York, told the Toronto Globe and Mail.
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