Nouriel Roubini? Nah. Kenneth Rogoff.
The former IMF chief economist was speaking at a conference in Singapore on Tuesday, warning of much more pain to come. As he told Reuters:
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…
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…
We have to see more consolidation in the financial sector before this is over…Probably Fannie Mae and Freddie Mac — despite what U.S. Treasury Secretary Hank Paulson said — these giant mortgage guarantee agencies are not going to exist in their present form in a few years.
And, presumably with an eye to where he was making his comments, Rogoff added that those sovereign wealth funds helping to bail out Wall St should not expect to make big money in the process.
There was this view early on in the crisis that sovereign wealth funds could save everybody. Investment banks did something stupid, they lost money in the sub-prime, they’re great buys, sovereign wealth funds come in and make a lot of money by buying them.
That view neglects the point that the financial system has become very bloated in size and needed to shrink.
Singapore’s GIC and Temasek, of course, have invested billions propping up Merrill Lynch and Citigroup.
Related links:
The world cannot grow its way out of this slowdown – Rogoff comment piece in the FT