U.S. Banking Industry Entering New Crisis...MW, Roubini, Whalen

From MarketWatch, Chris Whalen/Roubini ...

"WASHINGTON (MarketWatch) — The U.S. banking industry is entering a new crisis where operating costs are rising dramatically due to foreclosures and defaults, a well-known analyst said Wednesday afternoon.

“We are less than one-quarter of the way through the foreclosure process,” said Christopher Whalen, managing director at Institutional Risk Analytics at an American Enterprise Institute event.

“Rising operating costs in banks will be more significant than in past recessions and could force the U.S. government to restructure some large lenders as expenses overwhelm revenue.”

Nouriel Roubini, the bearish economics professor at New York University who in August 2006 predicted a difficult U.S. recession that emerged in late 2007, and other participants raised concerns about the economic outlook for the U.S. and global economy.

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Whalen added that recently agreed-to foreclosure moratoriums by GMAC, Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 13.41, +0.02, +0.15%) and J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 39.90, +0.26, +0.66%) are “only the start of the crisis” that threatens the financial foundations of the entire U.S. political economy. See earlier story on 'robo-signer' crisis.

The three lenders announced recently they would halt some foreclosures until they could determine whether or not employees signed off on affidavits without verifying the information in the paperwork.

Whalen argues that the largest U.S. banks remain insolvent and must continue to shrink. “Failure by the Obama administration to restructure the largest banks during 2007-2009 period only means that this process is going to occur over next three to five years — whether we like it or not. The issue is recognizing existing losses — not if a loss occurred,” he said."

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BTW, Roubini says 40% chance of double-dip recession on the horizon.

Whalen says big banks WILL have to be restructured.

Print Ben, Print!

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Remainder of story at link... LINK