US banks insolvent?

New York University Professor Nouriel Roubini is someone we at Leavonomics take very seriously because 'Dr. Doom's' economic predictions tend to be very accurate. Yesterday he said US financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is "effectively insolvent". "I've found that credit losses could peak at a level of $3.6tn for US institutions, half of them by banks and broker dealers," Roubini said at a conference in Dubai yesterday. "If that's true, it means the US banking system is effectively insolvent because it starts with a capital of $1.4tn. This is a systemic banking crisis."

Losses and writedowns at financial companies worldwide have risen to more than $1tn since the US subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

Oil prices will trade between $30 and $40 a barrel all year, Roubini predicted. "I see commodities falling overall another 15-20pc ," Roubini said. "This outlook for commodity prices is beneficial for oil importers, it's going to imply that economic recovery might occur faster, but for oil exporters this will be very negative."