The global financial crisis is set to get worse, with a large US bank likely to collapse in the next few months, a former IMF chief economist has warned.
Kenneth Rogoff’s comments came as shares in Fannie Mae and Freddie Mac sank on a report that the home lenders would, in effect, be nationalised.
Despite hopes that the US economy had turned the corner, Mr Rogoff claimed it was “not out of the woods”.
“I would even go further to say ‘the worst is to come’,” he said.
“We’re not just going to see mid-sized banks go under in the next few months,” said Mr Rogoff, who held the IMF role between 2001 and 2004.
“We’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks.”
| We have to see more consolidation in the financial sector before this is over Kenneth Rogoff |
Speaking at a conference in Singapore, Mr Rogoff, now an economics professor at Harvard, forecast that Fannie Mae and Freddie Mac would “probably” not exist in their present form in a few years.
“We have to see more consolidation in the financial sector before this is over.”
On Monday, shares of Fannie Mae fell more than 22%, or $1.76, to close at $6.15. Shares of Freddie Mac fell almost 25%, or $1.46, to $4.39.
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