Tuesday, May 5, 2009
Roubini and Me, Sitting in a Tree
O frabjous day! Nouriel Roubini - that most outspoken and clever economist also known as Doctor Doom - agrees with me. Roubini is one of my financial heroes (along with Tim Geithner, who is admittedly not making the best impression right now), and I usually agree with everything he says. This time Roubini is supporting my argument that the banks need to shore up their capital reserves. And without getting the dosh from the government. His op-ed piece in today's Wall Street Journal, co-written with his NYU Stern colleague Matthew Richardson, says many banks will fail the ongoing stress tests. And that they are as close to insolvency as banks can get, especially if you remove the taxpayers' funds that are currently supporting them. He wants Congress to float and pass a law that gives the US government more power to control the banks, and to guide them through bankruptcy if necessary. Other financial pundits are calling this 'nationalization'. I disagree. It is called leverage. Wall Street still has the upper hand, and can walk all over the US government and the taxpayers if it so pleases. And - believe me - it pleases.