Greenspan: Financial Crisis Likely Worst Since WWII

Alan Greenspan writes in the Financial Times:

The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.

Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes - those belonging to builders and investors - have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.

The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market's rapid contraction have involuntarily added an additional 200,000 newly built homes to the "empty-house-for-sale" market.

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Comments

[Carl2680]

Perdurabo you hit it right in the Nail. The culprits of all these financial problems are the Roschilds, Rockefellers, Morgans and Duponts. They are the shadow goverment they control the currency and decide who become president. They already formed the European Union, Now its american turn to become the North American Union alone with Mexico and Canada. Of course they will bring us the Amero that will replace the dollar. say goodbye to your American Citizenship and constitution.

[letsmakesense]

Fact:
10 days ago Greenspan told Middle East oil people to get out of their dollars.
Halliberton and Presidente Chenny got out a year ago.
Sorry you missed your chance when you did not vote for Dr. Ron Paul.

[NoahVail]

That's pretty true, right up to the last sentence. That's when you stopped making sense, when you endorsed the guy who wants to de-federalize the highways...

[loki]

Hey, Ive been wondering about that. You got a link or something showing if Chenny and Bush converted to other Currency?? That would be fantastic to know. Really I mean Horrible, but it would show many of the Neo Cons just where their leaders loyalties stand.

[nippersdad]

Strikes me that the problems that we see today are largely due to lack of oversight and deregulation, how would voting for a strict libertarian solve these problems?

[letsmakesense]

The worst since 1945?
Title should have been worst than 1945.

[gnomic]

Greenspan can't be right. Didn't Dubya just say that this was just a slow down? Didn't Paulson say that they had foreseen this and acted accordingly on the Sunday talk shows? Didn't Bush just give a talk to the NY Economist Club and school them on overcorrecting?

This is what happens when cults elect morons to office. People die. Countries suffer. Economies collapse.

The sad part is that the moron in chief won't serve the hard time he deserves for betraying his oath of office and his country.

[MajorKong]

Don't worry, George W. Bush and his highly competent economic team are on the job.

Eeeeeeeeee­ek!!!!!!!!­!!!!!!!!!!­!!!!!!!!!!­!!!!!!!!!!­!!!!!!!!!!

[Novista]

And here's Easy Al in 1966:

"The excess credit the Fed pumped into the economy spilled over into the stock market -- triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too little too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed."

Now, if he understood that then, you think he forgot it 'now'? I say he was just following orders.

[NPDee]

It wasn't really a boom because it was all funded on credit. It was irrational. Manic. A great drunken evening followed by a dark morning after.

[winkin]

Greenspan speech - Feb 23, 2004

"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage".

Well, they came up with some great mortgage products, didn't they?

http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/

[nanotubz]

The ultimate hutzba of our time. The chief watchmaker of of most of these economic problems, is complaining about his own creation as if he had nothing to do with any of it.

[Tom95134]

Greenspan should know since it was his policies that started us down this path.

[CallMeLiberal]

You've got to be kidding me. This is downright disturbing -- it's clear that Greenspan feels that he had no hand in getting us into this mess. For the good of himself and for all of humanity he needs to shut the hell up.

Alan: You had the CEO job and you destroyed the business. You don't get to tell us how to "fix" it since you clearly don't have the first clue. Go play bridge with Jimmy Cayne.

[CanuckforObama]

This has to be the dullest commentary I have read yet about this crisis. Notice how neutral the tone of the article is. This tone is a huge part of the problem: laissez faire and the innate belief that the market is best when left alone. The most serious aspect of this recession is not the fact that it is actually happening but that this time the federal government has almost no room to manoeuvre. Even during the recent boom, we have witnessed record deficit spending, record consumer debt, a social welfare system slashed to the bone, low taxes and interest rates and war spending at full throttle. What other rabbit can possibly be pulled out of the hat to stave this thing off or at least mitigate its effects?

[pahpah25]

greenspan is noted for saying absolutely nothing in as many words as possible.......his wife, andrea mitchell of nbc news......­.........d­oes exactly the same.....i think it is something these people are taught in childhood.­..........­it is an excellent way to lie without actually saying the 'lie'.

[totalliberal]

Bush has been living off this fairy tail economy for years claiming growth from his stupid tax-cuts for the rich. Now not only are we suffering but we tax payers are forced to bail out his base. (Idiot CEO's with no clue about how to run financial institutions honestly.)

[LiarLiarIraqsOnFire]

So the economy is going to be worse than it was in the 70's?

At least in the 70's Carter brought a modicum of Peace to the Middle-East.

[themodernleader]

We were on top of the world economically and financially after WWII. Mr. Greenspan should have studied history rather than cockeyed writings of ideologues. The last great crisis was the result of another period of unrestrained capitalism that brought on the great depression. Those leaders of that period did not debase our currency with bailouts of a criminal class of pyramid scheme lenders using our Nation's currency. Still it required the onslaught of a foreboding of war to finally pull us out of that terrible economically depressed period. Now our economy has been decimated by greed, avarice and corrrupt governance. We must become united quickly and develop a national strategy to deal with this peril or decline into chaos and fall under the yoke of foreign ownership and control. "American leaders, awaken! You have nothing to lose except your positions and the Republic to gain."