Nouriel Roubini was was in fine form yesterday, scaring the bejeezus out of his followers on Twitter by saying that several huge financial institutions could collapse in the blink of an eye like MF Global.
These houses of cards, Roubini tweeted, include:
Goldman Sachs
Morgan Stanley
Jefferies
Barclays
The problem, as Roubini has consistently warned, is the banks' dependence on short-term financing to maintain their long-term asset leverage and run their businesses.
What killed MF Global, Lehman Brothers, Bear Stearns, AIG, and other huge financial firms, after all, was the sudden refusal of short-term lenders to continue lending money to the firms.
If you don't understand this short-term funding dynamic, and the enormous risks it creates, read this excellent William Cohan article on how Jon Corzine just flew MF Global into a mountain.
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