Roubini sees a global run on the banks

Daily Telegraph today… Professor Nouriel Roubini spotted the housing crisis in early 2006 – now he predicts an almost invisible global banking crisis as institutions quietly shift their assets to safe havens. For those who think they may be able to wait to buy precious metals as this unwinds, this ought to be a wake-up call to buy gold and silver while stocks last…This is from the paper:

“Roubini’s thesis is that there is now a “silent run” hitting the world’s banks. There may be no Northern Rock-like queues of retail depositors standing outside bank branches.

But, he maintains, pension funds, insurers and the world’s largest companies are quietly shifting billions from banks they fear may collapse to banks in which there is marginally more confidence. If a bank as big as Wachovia could go down in the US, and Fortis could require a rescue in Europe, which banks were actually safe?

Banks whose deposits are not insured are vulnerable to this panic, he said. American banks are vulnerable to European and Asian depositors withdrawing their money.

“I was in London last week,” he said. “A European bank asked to pull $100m out of a US bank,” he said. “The US bank asked for a week [to execute on this demand],” he said.

Roubini described the year-and-a-half old financial crisis as a progression from the outer rim of the Western financial system to the core.

First, he said, the sub-prime mortgage crisis decimated the shadow banking system – the network of specialised financial companies chartered in secrecy havens such as the Channel Islands where banks booked loans to get round regulations limiting their debt levels.

Over the past three weeks, he said, the crisis hit the mainstream banking system. Last week it spread to the commercial paper market – where companies borrow unsecured funds overnight from the world’s big banks and investors.

“If the commercial paper market is not unclogged, insolvencies will spread from the banking system to the corporate sector,” he predicted.”