Nouriel Roubini on Financial Crisis

Nouriel Roubini believes that the US economy is in the worst recession in decades and the worst financial crisis since the great depression.  He predicted that Fannie Mae and Freddie Mac were insolvent and also predicted that many of the major broker/dealers would be out of business. 

He believes that the FDIC will run out of money and that the financial crisis cannot be averted.  He also believes that the bailout of Wall Street is a moral hazard.  Firstly, shareholders should be wiped out, bond holders should take a haircut, and management should be replaced accross the board.  The bailout privatizes the gains and socializes the losses and Roubini calls it a reckless practice. 

He believes that inflation is not a concern as there will be a downside risk to the GDP and oil prices should drop sharply.  He suggests that this is a systemic financial crisis which is far worse than the S&L crisis in 1987.