The Bankwatch

Tracking the consumer evolution of financial services

Roubini stresses the point that the Geithner plan does not avoid bank nationalisation

Roubini stresses the point that the Geithner plan does not avoid bank nationalisation. 

Roubini Says Geithner Plan Won’t Prevent Bank Nationalizations | RGE Monitor

U.S. Treasury Secretary Timothy Geithner’s new plan to remove toxic assets from the books of the nation’s banks won’t stop some financial companies from having to be nationalized, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

The key is the stress testing methodology which in essence looks at banks’ liquidity and capitalisation.  If the bank is insolvent, that is, cannot maintain its commitments then it will be taken over. 

The key remains the impact of the removal of toxic assets from bank balance sheets.  The extent of the problem is not well understood, and as Roubini says –

Roubini, who also runs his own economics consultancy, estimates a total of $3.6 trillion of loan and securities losses in the U.S., including writedowns on $10.84 trillion of securities and losses on a total of $12.37 trillion of unsecuritized loans.

Written by Colin Henderson

March 27, 2009 at 01:07

Posted in Uncategorized

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