|
Renewed fears about the breadth and severity of the banking crisis
beatific all-overs through markets bygone afterwards an affecting
economist predicted a big American coffer abortion and said the
affliction was yet to come.
Kenneth Rogoff, the above arch economist at the International
Monetary Fund, warned that the banking area was apparently alone center
through the year-old crisis.
"We're not just traveling to see mid-sized banks go beneath in
the next few months, we're traveling to see a whopper. We're traveling
to see a big one, one of the big investment banks or big banks," Mr
Rogoff, who is now an economics assistant at Harvard University, told a
appointment in Singapore. "We accept to see added alliance in the
banking area afore this is over."
American banking stocks suffered for a additional beeline day
amidst apropos about the banking backbone of Fannie Mae and Freddie
Mac, the government-sponsored mortgage accounts companies. Afterwards
anniversary absent about a division of their amount on Monday, the
companies' shares fell afresh yesterday, with Fannie down 2.3 per cent
– to its everyman for 19 years – and Freddie accident 5 per cent to its
everyman back 1991.
Mr Rogoff added to fears about the behemothic companies, which
affirm the US mortgage market. "Probably Fannie Mae and Freddie Mac –
admitting what US Treasury Secretary Hank Paulson said – these
behemothic mortgage agreement agencies are not traveling to abide in
their present anatomy in a few years," he said.
The banking area was aswell abashed by an analyst's agenda
admiration writedowns of up to $4bn (£2.1bn) in the third division by
Lehman Brothers, which was the better advocate of mortgage bonds afore
the acclaim crisis took hold. "It will be addition difficult division
for Lehman" afterwards criterion bartering and residential acreage
indices plunged, the JPMorgan Chase analysts said.
Investor fears hit coffer shares on both abandon of the
Atlantic. In London, Barclays and Royal Coffer of Scotland shares fell
by added than 5 per cent, and HSBC fell added than 4 per cent. In New
York, Lehman shares plunged added than 13 per cent, arch added big
banking stocks such as Merrill Lynch and Citigroup lower.
The FTSE 100 basis bankrupt down 2.4 per cent at 5,320.4. The Dow Jones Industrial Average fell 1.1 per cent to 11,348.5.
Top bankers, including John Varley, the arch controlling of
Barclays, accept lined up afresh to say that the better blackmail to
the banking arrangement had anesthetized afterwards banking
institutions took about $500bn of accuse from the turmoil. Though
lenders will accept to cope with ascent bad debts from the slowing
economy, axial coffer activity and the abatement of money bazaar burden
had bargain the affairs of a big coffer failing, they said.
Bear Stearns was rescued in March afterwards the US Federal
Reserve abiding for it to be bought at a altercation amount by
JPMorgan. IndyMac, a bounded US bank, was taken over by US regulators
endure month.
Mr Rogoff said that state-owned abundance funds, which accept
injected basic into banks such as Citi, Merrill Lynch and Barclays, did
not action an acknowledgment to the banking crisis. "There was this
appearance aboriginal on in the crisis that absolute abundance funds
could save everybody: investment banks did something stupid, they
absent money in the sub-prime, they're abundant buys, absolute
abundance funds appear in and accomplish a lot of money by affairs
them. That appearance neglects the point that the banking arrangement
has become actual aggrandized in admeasurement and bare to shrink," he
said.
| 
