Nouriel Roubini Sees Deep Recession And Severe Financial Crisis Ahead (Janet Morrissey)

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(Investment News) -- Nouriel Roubini, one of the biggest bears on Wall Street, wasn't surprised by the fire sale at The Bear Stearns Cos Inc. of New York. He said it just reinforces his 12-point gloom-and-doom outlook, which he unleashed on Wall Street in February, and he now thinks that total financial losses in the credit debacle may top the $1 trillion he previously projected.

Mr. Roubini, 49, a professor at New York University's Stern School of Business and founder of RGE Monitor, a New York-based economic research firm, was met by skepticism when he first predicted a downturn in a July 2006 report, "A Coming Recession in the U.S. Economy." Today, few doubt his early insight.

Since then, his predictions have become even more dire, with forecasts of mounting financial losses and a possible "catastrophic" meltdown in U.S. financial markets.

Mr. Roubini's 12-point outlook forecasts that housing prices will plummet 20 percent to 30 percent from their peak, subprime mortgage losses will exceed $300 billion and credit losses will spread outside the subprime arena to credit cards, auto loans and other areas.

He further expects monoline companies, which insure against defaults on certain municipal bonds and mortgage-related securities, to be downgraded, leading to more write-downs.

Other predictions include a meltdown in commercial real estate (see story, Page 44), a wave of defaults on corporate debt and credit default swaps and a sharp drop in liquidity, which could lead to fire sales of assets.

Reached by phone in Stockholm, Mr. Roubini spoke about current conditions and what he expects next.