Banks face insolvency, crisis predictor says

Bloomberg News
Published: January 20, 2009
Dubai, United Arab Emirates: Nouriel Roubini, the New York University professor who predicted the 2008 economic crisis, said Tuesday that U.S. financial losses from the credit crisis might reach $3.6 trillion, suggesting that the banking system in the United States was "effectively insolvent."
"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. This is a systemic banking crisis."
Losses and write-downs at financial companies worldwide have risen to more than $1 trillion since the credit crisis began in 2007, according to data compiled by Bloomberg.
Bank of America, the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and has received $138 billion in emergency government funds.
Citigroup posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under the plan by its chief executive, Vikram Pandit, to rebuild a capital base eroded by the crisis. cont.
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