http://www.bloomberg.com/apps/news?pid=20601087&sid=aXtNRPHr7HY0&refer=home Roubini Says a âSovereign Bank May Crackâ as Crisis Worsens By John Fraher Feb. 19 (Bloomberg) -- Nouriel Roubini, the New York University professor who predicted the global credit crisis, said a âsovereign bank may crackâ as governments try to bail out their financial systems. âThe process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign,â said Roubini on his blog today. âAt some point a sovereign bank may crack, in which case the ability of the governments to credibly commit to act as a backstop for the financial system -- including deposit guarantees -- could come unglued.â Roubini didnât identify any individual âsovereign bankâ that might run into difficulty. To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net Last Updated: February 19, 2009 11:39 EST
what does cracked mean? that their liabilities are greater than their assets, or that people finally figure it out?
Here's a correction. He's not talking about banks, but about a government failing, from an economic viewpoint. ~~~~~~~~~~~~~~~~~~~~~~~~ Roubini Says a âSovereignâ May âCrackâ Amid Crisis (Correct) By John Fraher and Courtney Schlisserman (Corrects to remove âbankâ after âsovereignâ reference from headline and first and second paragraphs reflecting Roubini revision of comments on his Web site.) Feb. 19 (Bloomberg) -- Nouriel Roubini, the New York University professor who predicted the global credit crisis, said a âsovereign may crackâ as officials try to bail out their financial systems. âThe process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign,â Roubini wrote on his Web site today. âAt some point a sovereignâ may âcrack, in which case the ability of the governments to credibly commit to act as a backstop for the financial system -- including deposit guarantees -- could come unglued.â Roubini didnât identify any government that might run into difficulty. He apologized for âconfusionâ stemming from his earlier reference to a âsovereign bank,â according to his Web site. He also said he sees a 30 percent chance of an âL-shaped near-depressionâ without âappropriate and aggressive policy actionâ by the U.S. and other major economies. The latest data indicate fourth-quarter gross domestic product in key economies including the U.S., the euro zone and Japan may be worse than initially reported. âThe global economy is now literally in free fall as the contraction of consumption, capital spending, residential investment, production employment, exports and imports is accelerating rather than decelerating,â Roubini said. The protracted downturn Roubini warned of can only be prevented by âa strong, aggressive, coherent and credible combination of monetary easing (traditional and unorthodox), fiscal stimulus, proper clean-up of the financial system and reduction of the debt burden of insolvent private agents (households and non-financial companies).â To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.netCourtney Schlisserman in Washington at cschlisserma@bloomberg.net