Financial Crisis Is Expected To Bring More Big Shocks

Financial Crisis Is Expected To Bring More Big Shocks
Monday August 18, 10:17 am ET CNBC

SmartStops comment: As might be expected in an uncertain market environment there have been plenty of “gloom and doom” articles lately. Here is another one to add to the collection. Whether you agree with the gloomy outlook or not, these articles should certainly prompt you to seek the portfolio protection being offered by SmartStops.net.

Excerpts: The year-old financial crisis is not only far from over but could actually get much worse, bringing more big shocks to the US economy and stock market, a host of experts said Monday.
Among the predictions: the failure of some of the country's biggest financial institutions, the collapse of 1,000 banks and a possible government bailout of mortgage giants Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News).
Meanwhile, billionaire investor Wilbur Ross told "Squawk Box" that a thousand banks could fail before the financial crisis is over.
"Not very big ones necessarily," he said. "But a thousand banks is going to be a lot." And the impact on the credit crunch could be severe, he added.
"Each dollar of bank equity that gets lost takes out about 12 or 13 dollars of loans so there's a tremendous magnifier effect of small changes in bank equity."
His comments were echoed by Morgan Stanley co-President Walid Chammah, who told a German newspaper that the financial crisis will probably not end until next year or even 2010.
"We will likely see more insolvencies among small U.S. regional banks that have focused on mortgage business," Chammah said. .
And a Barron's article over the weekend said the U.S. Treasury is growing increasingly likely to recapitalize Fannie Mae and Freddie Mac in the months ahead on the taxpayer's dime.
The weekly financial newspaper said that such a move could wipe out existing holders of the agencies' common stock, with preferred shareholders and even holders of the two entities' $19 billion of subordinated debt also suffering losses.

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