[DEBATE] : Roubini Says Bank Takeovers Deepened Financial Market Crisis

[Riaz K Tayob]

[... or the problem is the solution...]

Roubini Says Bank Takeovers Deepened Financial Market Crisis

By Lynn Thomasson and Thomas R. Keene

April 8 (Bloomberg) -- Bank takeovers worsened the financial crisis by 
making firms that were already too big even bigger, said Nouriel 
Roubini, the New York University professor who predicted the financial 
crisis.

"The institutions are insolvent," Roubini said in a Bloomberg Radio 
interview. "You have to take them over and you have to split them up 
into three or four national banks, rather than having a humongous 
monster that is too big to fail."

JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. in March 2008, with 
help from the Federal Reserve, while Bank of America Corp. purchased 
Merrill Lynch & Co. Wells Fargo & Co. took control of Wachovia Corp. and 
PNC Financial Services Group Inc. got National City Corp.

Banks around the world have reported $1.29 trillion in credit losses 
tied to the housing market collapse since 2007. The deficits, which 
spurred the first simultaneous recessions in the U.S., Europe and Japan 
since World War II, pushed the American government to pledge $12.8 
trillion to stabilize the banking system and revive economic growth. 
That figure amounts to $42,105 for every man, woman and child in the 
country.

The Standard & Poor's 500 Index, which tumbled 38 percent in 2008, has 
rallied 22 percent after sinking to a 12-year low on March 9. Roubini 
said in a Bloomberg interview that day that the S&P 500 is likely to 
drop to 600 or lower this year as the global recession intensifies.

To contact the reporters on this story: Lynn Thomasson in New York at 
lthomasson at bloomberg.net; Thomas R. Keene in New York at 
tkeene at bloomberg.net.
Last Updated: April 8, 2009 14:53 EDT

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