^As long as the money is not held in a US bank:
(from:
Credit crunch may take out large US bank warns Professor Kenneth Rogoff - Times Online )
The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today.
Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the Untied States, and that a high-profile casualty among American banks was highly likely.
“The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come,” Prof Rogoff said at a conference in Singapore.
In an ominous warning, he added: “We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one — one of the big investment banks or big banks,” he said.
Prof Rogoff, who was chief economist at the IMF from 2001 to 2004, predicted that the crisis would foster a new wave of consolidation in the US financial sector before it was over, with mergers between large institutions.
He also suggested that Fannie Mae and Freddie Mac, the struggling US secondary mortgage lending giants were likely to cease to exist in their present form within a few years.
His prediction over the fate of Fannie and Freddie came after investors dumped the two groups’ shares on Monday after reports suggested that the US Treasury may have no choice but to effectively nationalise them.
The professor also sounded a warning over rising US inflation, which rose last month to its highest since 1991, and criticised the Federal Reserve for having cut American interest rates too drastically. “Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States,” he said.
Rising dread of “worse to come” in the American mortgage and banking sectors plunged Asian stocks into a spiral of despair, with the region’s major bourses in sharp retreat throughout Tuesday’s session.
The jitters in Asia that followed Wall Street’s dire overnight performance and the growing sense that the US authorities will soon be forced to nationalise Fannie Mae and Freddie Mac have proved devastating for sentiment on large parts of the Asian financial sector.
Although Japanese banks, for example, have remained relatively under-exposed to sub-prime mortgage products, many fear that they would be heavily exposed to a nationalisation. The large Japanese financial houses hold around Y9.6 trillion (£47 billion) in bonds and mortgage-backed paper issued by housing finance firms in the US.
“If the recapitalisation talk is realised, there are no assurances that the securities that have been issued [by U.S. mortgage firms] will be 100 percent guaranteed,” said Yutaka Shiraki, a senior equity strategist at Mitsubishi UFJ Securities.