Banks Too Big to Fail, Too Big to Bail Out

European governments face the quandary of being unable to afford to bail out banks that are still considered too big to fail, while the global economy is heading for a slowdown in the second half of the year, economist Nouriel Roubini of Roubini Global Economics told CNBC Tuesday.

Nouriel Roubini
CNBC

"A year ago we had all these policy bullets," he said. "We could push down rates to zero, we had (quantitative easing), we could do a budget deficit of 10 percent of GDP (or) backstop the financial system."

"Banks at this point are too big to fail, but also too big to be bailed, especially in Europe where the sovereigns are in trouble and therefore the ability to backstop the financial system is not there," he said.

Roubini said he was unimpressed with the June US employment report, pointing out that the jobless rate fell because of a large number of discouraged workers leaving the labor force, and also noted recently weak data on manufacturing, retail sales and housing.

"Everything signals a slowdown of the US, a slowdown of Europe, a slowdown of Japan and a slowdown of China," he said.

(More here.)