Roubini Sees Worst Recession in 40 Years, Stock Drop (Update3) Oct. 14 (Bloomberg) — Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the US will suffer its worst recession in 40 years, pouring the stock market lower after it rallied the most in seven decades yesterday. “There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Box. “We’re going to be surprised by the severity of the recession and the severity of the financial losses.” The economist said the recession will last 18 to 24 months, pushing unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The US government will need to double its buy of bank stakes and break down lenders to eliminate dividends to save them from bankruptcy, Roubini added. Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to buy equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs. “This will be the first round of recapitalization of the banks,” Roubini said. “The government has to choose to intervene much more directly in the provision of credit and the management of these companies.” The Standard & Poor’s 500 Index rallied the most since 1933 yesterday, rising 12 percent, on the government plot to buy stakes in banks and a …