The keynote speaker at a major conference today in Dubai was highly respected Professor Roubini. As noted below, Roubini stated to an audience of very wealthy Arabs that both the U.S. and European banking systems are insolvent. Shortly afterwards, gold soared and the banking sector was bludgeoned. It is probably not a coincidence that wealthy Arabs have a strong affinity for gold and that they hold very large stakes in U.S. and European banks. These major stakes, of course, were lightened somewhat today!

Although this may have been Obama's big day, a large portion of it was sponsored by none other than Wall Street hedge funds. Here is the link...

http://tinyurl.com/73l69a

Regards - VHF

-

Roubini Predicts U.S. Losses May Reach $3.6 Trillion

By Henry Meyer and Ayesha Daya

Jan. 20 (Bloomberg) -- U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

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

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.

‘Bankrupt’ System

“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

Stocks in Europe, Canada and Brazil dropped yesterday on speculation government efforts to shore up the financial industry will fail to stem the deepening global recession. The U.K.’s Royal Bank of Scotland Group Plc said it expects to post a loss of as much as 28 billion pounds ($41 billion) for 2008 and the government got ready to raise its stake in the lender.