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Thread: Greenspan warns of Calamity???

  1. #1
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    Greenspan warns of Calamity???

    Hello all,

    Were you worried yet??? You will be now.

    http://www.msnbc.msn.com/id/27335454
    Greenspan: ‘Once-in-a-century’ financial crisis

    In testimony, former Fed chairman warns that unemployment will climb


    WASHINGTON - Former Federal Reserve Chairman Alan Greenspan said Thursday the current financial crisis is a “once-in-a-century credit tsunami” which will have a severe impact on the U.S. economy, driving unemployment higher.

    Greenspan, who headed the nation’s central bank for 18˝ years, said that he and others who believed lending institutions would do a good job of protecting their shareholders are in a “state of shocked disbelief.”

    He said that the current crisis had “turned out to be much broader than anything that I could have imagined.”

    The committee called Greenspan to testify along with former Treasury Secretary John Snow and Securities and Exchange Commission Chairman Christopher Cox as lawmakers sought to discover if regulatory failings had contributed to the crisis.

    House Oversight Committee Chairman Henry Waxman said that he believed that the Federal Reserve, which regulates banks, the SEC and the Treasury had all played a role in contributing to the mistakes.

    “The list of mistakes is long and the cost to taxpayers is staggering,” Waxman, D-Calif., told the three men. “Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became that government regulation is wrong. The market is infallible.”

    In his testimony, Greenspan blamed the problems on heavy demand for securities backed by subprime mortgages by investors who did not worry that the boom in home prices might come to a crashing halt.

    “Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment,” Greenspan said. “Fearful American households are attempting to adjust, as best they can, to a rapid contraction in credit availability, threats to retirement funds and increased job insecurity.”

    Greenspan said that a necessary condition for the crisis to end will be a stabilization in home prices but he said that was not likely to occur for “many months in the future.”

    When home prices finally stabilize, Greenspan said, then “the market freeze should begin to measurably thaw and frightened investors will take tentative steps towards re-engagement with risk.”

    Greenspan said until that occurs, the government is correct to move forward aggressively with efforts to support the financial sector. He called the $700 billion rescue package passed by Congress on Oct. 10 “adequate to serve the need” and said that its impact was already being felt in markets.

    Greenspan did not specifically address the criticism he is receiving now as being partly to blame for the current crisis.

    Greenspan’s critics charge that he left interest rates too low in the early part of this decade, spurring an unsustainable housing boom, while also refusing to exercise the Fed’s powers to impose greater regulations on the issuance of new types of mortgages, including subprime loans. It was the collapse of these mortgages and rising defaults a year ago that triggered the current crisis.

    In his testimony, Greenspan put the blame for the subprime collapse on over-eager investors who did not properly take into account the threats that would be posed once home prices stopped surging upward.

    “It was the failure to properly price such risky assets that precipitated the crisis,” Greenspan said.

    Fun huh,

    Korbel
    Last edited by korbel; 10-23-2008 at 02:06 PM.
    Korbie: of the Boston Red Sox Nation...the NBA Champion Boston Celtics Pride...and...the New England Patriots Dynasty!

  2. #2
    Good post, Korbel. Greenspan supported Phil Gramm's banking industry deregulation bill (the Gramm-Leach-Bliley Act) in the late 1990's. The transactions and "financial instruments" that are largely to blame for the current crisis were not allowed under the legislation that was in place before bank deregulation.

  3. #3
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    Let's not forget it was Greenspan who kept lowering interest rates continually even when the economy was better. Like he is without blame for this fucking mess?

  4. #4
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    Quote Originally Posted by EagerBeaver
    Let's not forget it was Greenspan who kept lowering interest rates continually even when the economy was better. Like he is without blame for this fucking mess?
    Correct E,

    Today at the news conference he was trying to blame others and unforeseen circumstances like the fact that the banks failed to adjust to conditions after he said more regulations were not necessary. CNN put him on their list of the ten most responsible for this mess.

    Pfssst,

    Korbel
    Korbie: of the Boston Red Sox Nation...the NBA Champion Boston Celtics Pride...and...the New England Patriots Dynasty!

  5. #5
    Everyone was responsible for it...

    Wall street for underwriting and RE SELLING these mortages. If they didnt this would have been contained in large part in the US. (A global rescession could of been avoided)

    S&P and Moody rating agencys for giving the debt A rating,

    The 8000 competing US banks who all wanted a peice of the 160 billion $$ fees, who did nothing more then check for the clients credit score, no proof of assets no proof of income.

    The greedy americans who levergared them selves to the point of no return when there houses all of a sudden increase by 100%

    but yes.. if you want to have the root cause of it all or the "HOST" of this virus, it was indeed when Greenspan droped rates to 1%.. this was where the virus was born and it just spread like a wild fire in a calfornia forrest.

    Funny thing though Bernake might have to drop the rates to 0% in order to kick start the economy.. but this time around there will no longer be any crazy lending so it wont actually place us back into the same shit hole we are all in.
    Last edited by kill_shill; 10-26-2008 at 01:05 PM.

  6. #6
    Quote Originally Posted by kill_shill
    Funny thing though Bernake might have to drop the rates to 0% in order to kick start the economy.. but this time around there will no longer be any crazy lending so it wont actually place us back into the same shit hole we are all in.
    Good observation. We certainly won't be coming out of this recession for quite awhile. Historically, the severest economic downturns in American history have been associated with complete collapse in the housing market like we've experienced.

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