Obama Has Your Credit

Prediction: The Federal Government is going to suck up all the credit in America, and the American consumer won't be able to get any. 

Figure 1: Federal borrowing as a % of GDP: Roosevelt vs Obama's First Year

Spengler notes:

Before America entered World War II, Franklin Delano Roosevelt borrowed no more than 6% of gross national product in a given year. During his first year in office, Obama will have borrowed perhaps double that amount.

Roubini notes:

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.