Financial Crisis is Becoming Severe

RGE Monitor

RGE Monitor

On Nouriel Roubini’s Global EconoMonitor, Nouriel explains why the Treasury rescue plan is very poorly conceived and does not contain many of the key elements of a sound, efficient and fair rescue plan – like a HOLC-style program and the need to recapitalize the financial institutions that are badly undercapitalized. Check out: RGE Conference Call on the Economic and Financial Outlook and why the Treasury TARP bailout is flawed.

The claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at the huge expense of the U.S. taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Check out Nouriel’s Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System‌ No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks.

In The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever, Nouriel explains why the risk of a total systemic meltdown is now as high as ever as the severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe in spite of the nuclear option of a $700 billion package.

The next step of this panic could become the mother of all bank runs: a run on the 1 trillion dollar plus of the cross border short-term interbank liabilities of the U.S. banking and financial system as foreign banks start to worry about the safety of their liquid exposures to U.S. financial institutions. Such a silent cross border bank run has already started as foreign banks are worried about the solvency of U.S. banks and are starting to reduce their exposure. Check out: Roubini Sees ‘Silent’ Run on Banks, Urges `Triage’: Bloomberg Radio Interview and BBC Hardtalk Interview with Roubini: “US Bail-Out Special”.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: