Tuesday, Aug 19, 2008
"Fasten your seatbelts. It's going to be a bumpy night."
BBC: US bank 'to fail within months'
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."
Posted by jack c @ 11:43 AM (1088 views) Add Comment
12 Comments
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1. maddison said...
Quite frankly the US deserve all they get. I know we pumped up house prices in the UK but the US subprime debacle made NRock seem conservative in their lending!
2. jack c said...
@ maddison - this should amuse you - "AIG becomes first US lender to return to sub prime"
see www.ftadviser.com/FTAdviser/Mortgages/Lenders/News/article/20080819/bd27b6a0-6d2c-11dd-8228-00144f2af8e8/AIG-becomes-first-US-lender-to-return-to-sub-prime.jsp for full story
3. Yerhavingalaugh said...
Anyone like to guess which one will fail first? My money is on Wachovia.
4. layers said...
My money's on Merrill Lynch to fail - just a guess.
5. mark said...
my money is not in CIti...lol
6. icarus said...
...and it won't be 'Bear Stearns Wealth Management, a JP Morgan Company'.
7. beartil2010 said...
Merrill Lynch looks shaky - otherwise why try to unload their own $40 billion of property - sounds like they're having a fire sale for everything to try and put enough capital in place to stop the collapse. Wachovia doesn't sound good either, nor Citi, but ML is my bet. JP Morgan will never fail as they have the fed backing them. UBS will be okay as will RBS and Credit Suisse, although all with their losses to bear.
8. holding out said...
Leaving aside Fannie and Freddie. I would have thought the obvious choice for an investment bank is Lehman brothers (or is that too small). In the case of a retail bank how about Washington mutual. If it or Wachovia went belly up it would wipe out the FDIC funds at a stroke. They'd then have to have a whip round for more funds from already hard pressed banks.
9. jack c said...
From www.citywire.co.uk/adviser/-/news/market-and-shares/content.aspx?ID=311905&re=3531&ea=118560
Banks and insurers continued to drag the FTSE 100 into the doldrums, depressing the index by almost 1.5%. This followed big losses in Wall Street yesterday which knocked the S&P 500 to close 1.5% weaker. The main UK index stood at 5,369 points just after noon, while mid-cap stocks also fell, taking the FTSE 250 to 8,943 points, a 1.98% slide.
The banks were hit by poor sentiment Stateside, where fears over the fortunes of US banks were stoked after a former economist at the International Monetary Fund warned that another US bank would go under.
In the UK, HBOS (its head office is pictured above) was the biggest faller in the blue chip index, shedding 5.6% to 282.5p after being downgraded by WestLB from a buy to add.
Barclays was also hit, falling 4.9% to 326p, alongside insurer Legal & General which dropped 4.85% to 98p and Lloyds TSB which lost 4.7% to 291p.
Companies related to house building, development and investment led the FTSE 250 fallers. The biggest loser of the morning was Daejan Holdings, which was off 8% to £26.04.
Brixton fell after revealing the extent of the impact from the credit crunch and tough commercial property market with a 18% decline in net asset value in the first half. Its shares fell 6% to 232p, having picked up slightly from greater losses in earlier trading.
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