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

[Crozier]

The quick fix for the deficits of George Bush was the housing sector. This is the fix that Goldspan and his ilk perpetrated on the only real treasure the working man has. Andrea Mitchell is of course, Mrs. Greenspan, lest anyone in the MSM ever state the obvious.

The difference of course, is obvious. The US was a nationalist and sovereign state. Its treasure was secure. Its money was based on gold in Fort Knox. It had a strong manufacturing base for all natural resources and was not dependent upon world trade for its economic strength. The economy was not based upon Wall Street but on Main Street. Pensions existed for workers. Workers were viewed as the corporation's asset - not a liability to be dismissed for one bad quarter on the stock exchange.
The centre of the American economy was the factory, not the mall. American manufactured. It did not as now, consume products made abroad with stagnant wages made in service jobs.

That America rebounded and could live again. Billary Borg Clinton or John McInsane will NOT return this country from the New World Order. They are its whoremasters and paid prostitutes. Their Neocon and DLC Parties are tied at the hip.

Only the American people can retake their democracy. That takes a leader....­a charismatic leader who will be supported by the Many.....E Pluribus Unum..... There are so few so-called "American business leaders" committing economic, political and military treason - that the awakened masses can bring them to justice.

[speakingtruth2power]

Likely worst since WW2? That means the great depression is the only thing worse than now!

AND, that may be an understatement since America came out on top, which it won't this time.

China is going to make a margin call at the most advantageous time for them, not for America.

[Christian]

Does this guy realize he is one of the asses that created these problems with his hands off no regulation policy? Next to Bushco, he is one of the top screw ups out there.

[Newman9]

Isn't that interesting. One of the two architects of the pending financial crisis (the other being Milton Friedman) now says that the curtain is coming down.

I'm sure it's no problem for Mr. Greenspan. He has probably put all his money in gold just prior to making his declaration.

Thanks for the "heads-up" Alan.

[RuralLib]

Yikes. There is not a lot of optimism here, is there? "Financial institutions will...go out of business"?!?! I note the words "gradually" and "slowly" and assume that means we have a long dusty road ahead. Maybe i'll plant a garden this year.

[DietrichMoody]

What is missing, is the rest of what Greenspan said "The essential problem is that our models " both risk models and econometric models " as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality."

Everything, with these people is based on models. Even in times of great fluctuation. That is why the Clinton's tolerated this man for so long. His Models.

Remind anyone of the "Iraq Model" 5 years ago.

The problem with the Greenspan way of thinking, the problem with the Clinton way of the thinking and the problem with the Cheney way of thinking - THEY DO NOT ACCOUNT FOR VARIABLES. That's is why we are in this mess.

[SamEllison]

Human nature does not explain it all Alan.
Just because the other guy got rich doing it doesn't make it moral or legal.

[shaefromTn]

Why do I not see any comments where are all the so called Christian conseratives?????? Maybe scratching off their W signs from their cars???????
I hope you all are happy with the state of our union going down the tiolet thanks to the imbeciles we have in the government.

[degjack]

So NOW you tell us!

Thanks a mil, Al!!

[castlerider]

Everyone with a brain knows Interests Rates right now, at this moment, need to be at 10. At least 8 !
This would bring MASSIVE amounts of investment in to our nation's infrastructure, and bring back the strength of the dollar very quickly..
However, we are in a stranglehold because to do such a thing would devastate home ownership with all the problems we're facing in the housing sector.

So why aren't we considering freezing interest rates on all businesses and residential property for at least 2 years, allowing buyers to buy at current rates for 3 to 6 more months when at which time, on a certain day, rates will be set to climb to the higher mark.. All buyers who bought before then could lock in or keep those rates Yes, we would be manipulating the rates, but so what? This would bring in MASSIVE amounts of purchasing before the deadline. Buyers everywhere sitting on a fence before they decide to buy would get the hell off! Some regulations will need to be in place so the system will not be abused by greedy investors and speculators, but that could be easily enough applied. The intensely strong flow of cash being spent so they could be getting these rates while they could, would spike our local economies almost everywhere as well.

This is just the kind of hands-on action Bush would never have the balls to take on.
It may sound a bit drastic, but as far as moving big amounts of hard cold CASH for serious investments it would work, and drastic times call for drastic measures.

[LordMoon]

Your right there should be price freezes on Gas, and on interest rates. But they free market men won't do that it's against their philosophy.

So once again those at the bottom will suffer,but those at the top will be protected.

[forpeace]

*

No kidding!

Okay Greenspan, we all knew that, now go talk to Commander Guy who's out of touch with reality and what is happening in this country.

*

[nazirmo]

Greenspan you appeared before many finance hearings before your term ended. If you were smart wouldn't you have known what was coming ? I guess not. You just had your high powered well paid job - made your money and went into a cosy retirement.

[pcthiker]

Thanks, W, and all those wing-nuts who worked for his election and voted for him. And now the safety nets put in place by Roosevelt are gone. And just look at who is at the helm. I expect the economy to get benign neglect similar to New Orleans.

[DietrichMoody]

What is missing, is the rest of what Greenspan said "The essential problem is that our models – both risk models and econometric models – as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality."

Everything, with these people is based on models. Even in times of great fluctuation. That is why the Clinton's tolerated this man for so long. His Models.

Remind anyone of the "Iraq Model" 5 years ago.

The problem with the Greenspan way of thinking, the problem with the Clinton way of the thinking and the problem with the Cheney way of thinking - THEY DO NOT ACCOUNT FOR VARIABLES. That's is why we are in this mess.

[Driver125]

Spin that, El Presidente­....