|
January 16, 2008
The New York Times reports that Citigroup is writing down $22.2 billion because of soured mortgage-related investments and bad loans. The bank is also cutting its dividend by 41 percent, obtaining a $12.5 billion cash infusion to strengthen its balance sheet, and cutting 20,000 jobs.
Citigroup’s capital levels have been severely depleted in the fallout from the continuing credit crisis and worsening downturn in the housing market. Even with the $12.5 billion capital injection, analysts think that the bank may need even more money to shore up its balance sheet if economic conditions worsen.
On his Global EconoMonitor blog Nouriel Roubini makes the following points in a presentation that provides his views on the US and global economic outlook for 2008 and the implications of this outlook for all the major financial markets and asset classes:
• The US will experience a hard landing (recession) that will be severe and protracted rather than mild
• The liquidity and credit crunch will get worse and the risk of a systemic financial crisis is rising
• The Fed easing will be “too little too late” and it will not prevent a recession
• The rest of the world will not decouple; it will rather recouple with the US hard landing leading to a global economic slowdown
That is not good news for Australia, facing strong inflationary pressures.
|
Gary,
Paul Krugman's op-ed in the New York Times--Responding to Recession explores the responses of the presidential candidates to the recession. He says:
He then analysizes them.