Major Bank To Crumble? Which One? And When?

Tuesday, August 19, 2008 at 06:08 PM

Meanwhile, back at the shamolic economy, courtesy those lovable buffoons known as our government, the word in the wind is that a big US bank is about to implode...

But which one?

From the Times Online:
The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today, fuelling another battering for banking shares.

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.

“The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come,” Prof Rogoff said at a conference in Singapore.

In an ominous warning, he added: “We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one — one of the big investment banks or big banks,” he said.

Professor Rogoff, who was chief economist at the IMF from 2001 to 2004, predicted that the crisis would foster a new wave of consolidation in the US financial sector before it was over, with mergers between large institutions.

He also suggested that Fannie Mae and Freddie Mac, the struggling US secondary mortgage lending giants, were likely to cease to exist in their present form within a few years.

Hmm. But which one? Citi? Aren't they being held out of the floes by Saudi Arabia? Maybe Wachovia? Washington Mutual?

I get the distinct feeling we've yet to see the worst of this plague, brought to us courtesy a government that no longer cares about We, The People, but cares more about cash donations to their campaigns.

And it just may come back to haunt us, except, we, the taxpayers, will foot the bill.


Odd factoid.

During the Great Depression over 500 banks failed in the US due to runs which couldn't be covered.

Canada which was (and continues to be) a li'l more fiscally conservative had zero banks fail in that same time.

Now guess how well that helped Canada ward off the worst effects of that terrible time.

The correct answer there is "none at all".

So Spud's curiosity over this story is somewot more than idle.

Fannie Mae and Freddie Mac simply can't go on in their current forms too much longer. That much at least seems obvious.

"...the worst is to come"

Oh, Yum.

More Dustbowl Days.

Be Well.

We interupt the comments to bring you a breaking bulletin:

Another one slides beneath the waves!


There are so many candidates for failure that it seems like opening night at the Student Playright Showcase.

Sound of Cannons came up with this list of 10 banks whose bad loans exceed their reserves. But I wouldn't take that measure as the sole means of identifying threatened banks--tons of banks have yet to really come clean about the extent of their bad loans, and I wouldn't be surprised if they're also overstating reserves.

Just in case you haven't had your daily dose of economic terror yet, think about this one: the ultimate US treasury takeover of "Fannie and Freddy" could lower foreign investor confidence in the Treasury itself to the degree that the US ends up paying significantly higher interest rates on our government bonds, ultimately leading to a "deep downturn in gross domestic product." That's the one possibility considered by Julian Bene in tomorrow's "Emirates Business 24-7."

Wonder how much of this is psychological according to Gramm and McCain?

Sleep well.