Bank takeovers ‘deepened crisis’

BANK takeovers worsened the financial crisis by making firms that were already too big even bigger, said Nouriel Roubini, the New York University professor who predicted the crisis.

“The institutions are insolvent,” Roubini said in a Bloomberg Radio interview. “You have to take them over and you have to split them up into three or four national banks, rather than having a humongous monster that is too big to fail.”

JPMorgan Chase agreed to buy Bear Stearns in March last year, with help from the Federal Reserve, while Bank of America purchased Merrill Lynch. Wells Fargo took control of Wachovia and PNC Financial Services Group got National City Corp.

Banks around the world have reported US$1.29 trillion ($2 trillion) in credit losses tied to the housing market collapse since 2007.

The deficits, which spurred the first simultaneous recessions in the US, Europe and Japan since World War II, pushed the American government to pledge US$12.8 trillion to stabilise the banking system and revive economic growth. That figure amounts to $42,105 for every man, woman and child in the US.
- Bloomberg


From TODAY, Business – Thursday, 09-April-2009