Roubini: More than 400 US Banks Will Fail

Friday, 03 Sep 2010 07:48 AM

Even if the U.S. and European economies manage to avoid a double dip, it will still feel like a recession, while more than half of the 800-plus U.S. banks on the "critical list" are likely to go bust, economist Nouriel Roubini warns.

“The biggest banks have been backstopped, but 800-plus small- and medium-sized banks in the U.S. remain on the critical list and half of those will go bust," Roubini he told CNBC.

Roubini said corporate and consumer debt problems will get worse and that there are more problems ahead in the commercial and residential property market.

Roubini recently said the chance of a double-dip recession in the U.S. was now more than 40 percent. "The positive scenario is that growth will be below par."

"The big risk is that there will be a downturn in markets that could impact the bond, the equity and the credit markets," he told CNBC.

Roubini’s comments came a day after Federal Reserve Chairman Ben Bernanke told a panel investigating the financial crisis that regulators must be ready to shutter the largest institutions if they threaten to bring down the financial system.

"If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved," Bernanke said Thursday while testifying before the Financial Crisis Inquiry Commission.

Separately, Roubini said that the U.S. economy is set to slow in the second half of the year as “tailwinds become headwinds.â€