Large Bank Collapse Projected In US By Former IMF Chief

SINGAPORE (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.

"The U.S. 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'," he told a financial conference.

"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," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.

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Comments

[strangerinthenight]

Guys, you're scaring ME. I have a humongous headache right now. What's up with AIG ?

'am 27, single, college grad (biochemist), good job with excellent credit; mortgage $1970/mo'125 year-old dilapidated stone house on a 1.48 acres; $319 car note; 5 credit cards, student loan $80. Chicago firm thoroughly investigated the structure and land free from Underground Storage Drums, water underneath. Everything is A-ok. Electrical wiring's, HACV, roof updated. Kitchen, 2 baths re-modeled. Carpets stripped, underneath was gorgeous wood floor.Still lots to be done. Bragging aside, mom/dad and neighbors are quite impressed. Truth be told, after all my expense, my savings are modest.

I had some landscaping, for the most part I do it, with help from my brothers. Ground is in great shape - Japanese rock garden, flower beds, grass, et al. I used to be scared of worms - I mean phobic. Gardening is relaxing, - tomatoes, peppers etc. For 2 years, my co-workers buys their veggies from me, pocketed $600 for the season.

The neighborhood and properties are pretty much the same, up further are great Estates like DuPont. Stable RE values, though reading your posts ruined my confidence - BIG TIME.

I live off Delaware-PA state line, West Chester. My neighbors are executives at DuPont, Banks, Insurance and credit card cos in Delaware - the biggest employers. I worry they are defaulting on their mortgages too. You seem to be saying I should sell my home ?

Very worried in WChester.

[nellieh]

I didn't read all the comments regarding this subject but as far down I went I read nothing about the Bankruptcy Act that makes it extremely difficult to eacape situations that have you paying 2'xs the amount you have coming in. This crisis wasn't started by inelegible people buying homes. It was caused by mortage brokers making up qualifying applications for inelegible buyers. Then they sold the contracts to greedy investment bankers who couldn't suck them up fast enough. It breaks my balls to hear only about 'buyers who knew what they were doing.' The lenders REALLY knew what THEY were doing. These people should be able to file bankruptcy unde the old law. Thanke to Joe Biden, Mr. MNBA, the knew Act was passed. And there are people who want him as a Vice President candidate. Pitiful

[bitabingbitabangbitaboom]

The more moderately loaned out folks who still have their Balloon Payments to make in the near future is where the CRISES lies......­......Ouch­..........­........al­l that has Hit so far is the Flippers and folks who could not afford a Home period anyway....­..........­..........­..........­Ouch......­........Ou­ch........­........Ou­ch!

[BeamMeUpScotty]

The heirs to the 90 billion dollar Wal-mart fortune are living in their underground lairs as we speak. My guess is the uber rich, who feast off the misery of the average citizen, are hiding because they know We the The People will be coming for them.

[mexicanamerican1948]

Great post, I agree. I am in the real estate business, this post is right. There is too many foreclosures yet to come for the type of loans that the investment bankers made with no way out by the homeowner. Dirty big secret many victims are minority groups that the hedge funds, investment bankers made billions. Banking regulation was ok for Bank but nothing for Investment Banks. This can take down the economy. This problem will not go away.

[Woggles]

I agree.

No one in media states the obvious. That home prices won't stabilize until the average person, of average means can actually afford them. BTW- I don't need to tell you, real wages compared to costs, have dropped for two straight generations.
A home should cost 2.5 years average gross wages, just like they did in 1963.
or about $100,000 in todays money. We still have a way to go, friend.

[EinChicago]

Average wages are 64K, so even if your assinine assumption was right, that would be an average of $160, not 100. Plus, to equal 1963, you'd have to also strip airconditioning, double paned windows, etc out of homes and go back to teh shoeboxes from teh 60s. And don't forget to jack up interest rates to the 9% mark they were in teh 60s. So basically, you're saying that buyers should pay the same each month as if they bought a $300K home for a $100K home, but the banks should make a lot more interest. lik ethey used to.

[zizyphus]

The cleverest criminals are the investment bankers. They have trillions in black market money to launder, so they will be okay. It is the poor folks with nothing but debt that will suffer.

More and more people are talking about the upcoming depression. There will be so many unemployed that they will be desperate for any job, even the worst ones, such as checking the IDs of people when they try to leave their streets after martial law is declared.

[Krikkit]

When news broke of the sub-prime lending crash, I warned people that bank closings would shortly follow, only to be labeled as a fear monger. Well, I ain't laughing now -- but I can say "told you so" to a few people who can't seem to make consequential predictions based on clear evidence.

[iambusto]

i am as knowledgable as regular folks so take it for what its worth.

Citi wont fail. It will most likely undergo massive restructuring with spinning off several divisions. so that cant be considered "failing" in this article's sense.

BAC, JPM, USB, WFC - none of these would fail. First two not because in addition to too big to fail, but because even with CFC acquisition, BAC still has a pretty solid balance sheet. JPM has huge derivative exposure but i consider it "too big to fail" category also. Jamie Dimon is one of the better ceo's out there and i doubt JPM fails under his stewardship.

USB and WFC are very well run banks. forget "well run". make it "excellently run".

So which "high profile, big" banks are in danger of failing.

If i were a betting man, my bets would be on WB and WM.

[Krikkit]

Don't bet on Citi. They lend to the sub-prime market with exorbitant interest rates, too. Puts them at risk like the others.

[HatingTheGame]

USB connects computer peripherals.

UBS is the Swiss banking giant.

Of course the next line is BSU is what we're all doing :-)

LOL

[iambusto]

USB ---> US Bankcorp. One of the best run banks in the country. its a super-regional bank that has excellent corporate governance.

[darthdarcy]

The Republicans with their deregulation of markets and banking and out of control borrowing have destroyed America's economy...and people keep voting for them...that is the definition of insanity..!

Voting Republican and expecting anything to get better...that's insanity..!

[aBr1t]

..and they all fall down

you aint seen Nothing yet folks :)

[Krikkit]

Don't smile, Brit. They're taking a goodly number of us regular folks down with them when they go.

[joebhed]

A little candor from the IMF's chief economist.

It should shut up those airheads on FoxBusiness and CNBC.
They can "feel" the turnaround happening with the dollar uptick and "leveling off" in some commodities.

Rogoff's is still an optimistic forecast.
Even his metaphors do not work for me.

About halfway through.
And the worst is yet to come.
Think about that.

If the worst is yet to come, when will it get here?
The housing resets will not peak for another 16 months.
There are going to be TRILLIONS in losses and a huge amount of corporate and banking M&A activity - just to stay alive.

If we haven't hit bottom yet, and if the real effects of this bursting bubble are in the additional TRILLIONS in losses, then there is no way that we can be halfway through it.
Unless "it" is getting to the bottom, not getting back up.

The US faces an incredibly under-capitalized economy with maybe $60 TRILLION in very real public and consumer debts.

Each of us MUST recognize that we are entering a situation that none of us, and none of our leaders, and none of our business schools have ever contemplated in their collective reality.

The FED has already run out of bullets, for the most part.
The capitalist fat-cat bankers have one hand in the taxpayer's pocket and the other around the throat of our money-ignorant politicians.

It is time to wise up America.

Monetary Reform Now !

[Krikkit]

Those trillions is losses will mean massive layoffs. Think of hundreds of thousands, if not millions of unemployed people on the dole. We're heading for another great depression, and like last time, we'll take the rest of the world down with us.

[joebhed]

I don't disagree at all.

Unless, ..........­..........­..........

The only hope I see is in a transition from our present debt-money to a credit-money system.

A transition from the private bankers creating the nation's money supply by issuing more of that debt.
A transition to the government of the people issuing the nation's money via credits paid to the people and the states.

Once these credits end up in the bank accounts of the people and the government, then the banks can lend it out to whoever wants to borrow it, at 100 percent reserves.
Let the banks lend out their depositors' money and that of their investors.

The EXACT same amount of NEW money would be created either way.
That exact amount would be limited to what is required to prevent inflation, or to preserve price stability, as they say.

Such a system was proposed to FDR, but the world wasn't ready for that revolution.

The combination of the complexity of modern money mechanics, plus the incredible powers that the banks had against even FDR's mandate, together caused the Chicago Plan for Monetary Reform to be pulled from proposed legislation.

Today we have this internet thing.
Soon enough people will wake up to its availing them of the tools for reform.

A new piece of legislation has been drafted by the American Monetary Institute.
Visit them at monetary.org .

Read the pamphlet ;

http://www.monetary.org/amacolorpamphlet.pdf

It's monetary reform, or just as you described.

[coyote4]

Folks, that was A merica's last hurrah. That was the last chance of the f ilthy rich to gather more of our wealth into the maw of their monstrous pockets. What we are seeing is the end of the pendulum swing of market fundamentals; now we pay.

I mean WE PAY, as in you and me: taxpayers. The filthy and the rich pay no tax.

This downturn is permanent. I warned you of the parameters of this new paradigm: Energy Scarcity and Global Climate Disruption. What we see in the rear-view mirror is the departing good times brought to us by market fundamentalists and soon to be paid for by you and me and our children and grandchildren and their children before them....

Short Financials. Long New Energy. Consider W ar as an investment and v omit as repentance.

Oh, and consider O as the POSSIBILITY of hope and change.

[larry278]

Before you look up IMF in Urban Dictionary, remember that W & Cheney got away with making Paul Wolfowitz the President of the World Bank, which works with the IMF, despite the opposition of the wonks of the World Bank & the IMF. While all bankers may not be IMF's, they got there because of the stupidity of their fother mucking supporters. It won't be surprising if both Freddie Mac & Fanny May go bust before Nov 4, 2008. An appointee of W is praising them or damning them with faint praise; expect nothing good of that.

[Krikkit]

Yeah, but the IMF quickly succeeded in EJECTING same Wolfowitz from its ranks.

[larry278]

It depends on what you call quickly. The IMF had to pay a price to 'eject' Wolfowitz. Cheney probably set the price which the World Bank had to pay to rid itself of Wolfowitz. The wonks of the IMF & the World Bank had to find the dough for Wolfowitz & his friend to get golden parachutes. Nothing is free in international finance & banking. Who got stuck with paying for 2 golden parachutes for 2 love birds?

[GerryS]

it'll be ok, BUSHCO(TM) will just use some more taxpayer dollars to bail out the overpaid bank executives that screwed the pooch by making bad business decisions. he's gotta save the uberrich bonus earners from their fates-

[Raymondf]

It will be Citicorp or Bank of America.

[jsarets]

Lehman

[leftLibertarian]

I heard it is Citicorp so I dumped my shares.

[joebhed]

Maybe all three.

Unless they merge.

Who says Rogoff is right that only one large bank will fail?

Give it 12 months.

Let's see where we're at.

[FogBelter]

WaMu, Wachovia ... there are a lot to choose from ... I think Wells Fargo is in relatively good shape.

Citi was hurting before it found a foreign buyer. BofA has exposure through Countrywide to Mortgages and through its purchase of MBNA a few years back, has extensive credit card exposure as well, if that segment goes south. Although General Tommy Franks is on the Board of Directors, which gives it a direct line to the Bush Administration ... that should aid the Bank until next January at least.

Hard to know where the hammer will fall at this point.

[MajorKong]

Don't worry. The Bush administration's top economic minds are working on it as we speak.

Eeeeeeeek!­!!!!!!!!!!­!!!!!!!!!!­!!!!!!!!!!­!!!!