Greenspan: Economy in 'once-in-a-century' crisis

[RedEarth]

Source: (CNN)

WASHINGTON (CNN) -- The U.S. credit squeeze has brought on a "once-in-a-century" financial crisis that is likely to claim more big firms before it eases, former Federal Reserve chief Alan Greenspan said Sunday.

Greenspan told ABC's "This Week" that the situation "is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go."

"Indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes," Greenspan said. He predicted that would not happen until early 2009, and said the odds of U.S. recession have gone up in recent months.

"I can't believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring," he said.



Read more: http://money.cnn.com/2008/09/14/news/economy/greenspan/

[Virginia Dare]

1. What genius has been minding the store asshole?

this guy has some nerve.

[truedelphi]

8. Isn't it beyond AMAZING?? n/t

[Joe Bacon]

32. if only Phil Gramm poured more cash into Truck Stop Women

If he had only poured more cash into his porn films, he would have never gotten into politics.

[Skwmom]

36. Hey now, that's McCain's #1 economic adviser you're talking about. Show a little deference.

[sudopod]

42. At least we're getting it out of the way early.

LOL

[Union Thug]

2. Greenspan and truth. Are pigs flying? Snowballs in hell?

And what was the the event of great magnitude that hit the financial markets in the 20th century? Any guesses?

[UpInArms]

3. oh - I almost split my sides laughing at your headline!

American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.

yes, indeedy! that was Alan "the Maestro" Greenscum at his very finest :sarcasm: hour - cajoling the average Joe/Jane into "eating their house"

Remarks by Chairman Alan Greenspan
Understanding household debt obligations
At the Credit Union National Association 2004 Governmental Affairs Conference, Washington, D.C.
February 23, 2004

That Washed Up Has Been Partisan Hack better have an unmarked grave.

[Born Free]

35. I remember a news clip and could not believe it

Interest rates were historically low yet Greenspan was testifying that more people should get Adjustable Rate Mortgages. They set the American people up for a fall because they knew that many Americans could be tricked into borrowing more and spending more, using the equity from their houses, and they did this to keep the Bush economy going. Alan Greespan should be held accountable for the role he played in helping to bankrupt America.

[Phoebe Loosinhouse]

37. That marked the nadir.

By 2004 it was clear to any rational person that housing was in the midst of an unsustainable bubble that would explode with horrible impact. It was Greenspan's fault for keeping rates artifically low when he should have been gently ratcheting them up starting in 2000 after the tech bubble.

My belief is he just wanted to keep it going long enough for him to get out and then hope it imploded on someone else's watch and then he could act act shocked and dismayed.

He was the major architect of this disaster.

[Yavin4]

4. He Should Know. He Put Us In This Situation.

He deliberately held interest rates low to set up Bush's re-election in 2004.

[kestrel91316]

5. Mission Accpmplished(TM). Way to go, Bushie!

[Rosa Luxemburg]

6. but, but McCain says the economy is doing great!

[CHIMO]

7. The MAN

That changed the Kondraieff wave to twice the size.

[Odin2005]

17. LOL, and now the K-wave is going down, down down into a burning ring of fire...

:yoiks:

[Waiting For Everyman]

9. Somebody needs to say, "Stop the foreclosures NOW!"

There's no bottom to the market until AFTER we do that.

[quiet.american]

10. Relax, everyone, McCain says the economy is making great progress!

:yoiks: :crazy: :wow: :scared:

[wordpix]

23. and with his eight luxury homes, he should know!

[ozymandius]

11. I honestly hate this fucker.

He never should have been placed in any position of financial authority. Now he gets to look important by proclaiming ruin where he planted the seeds.

[Gregorian]

12. Peter Wallison predicted the Fannie/Freddie problem long ago.

He may be one of the American Enterprise Institute, but he says that long ago he saw the flawed business model of these two. Part government, part private.

This is just what I've gleaned from his cspan interview.

[CHIMO]

18. Central bank saw disaster coming

Many of the world's central bankers saw signs of a credit crisis five years ago, said former Bank of Canada governor David Dodge, but no one foresaw the “period of great financial danger and unrest” that followed the meltdown in credit markets last summer.

“We've known for a long time, going back to 2003 and 2004, that we were building up to a global problem that needed to be resolved,” Mr. Dodge said during an interview to mark his new career as an Ottawa-based senior adviser to one of Canada's largest law firms, Bennett Jones LLP.

The biggest danger, he said was the overheated U.S. housing market and proliferation of mortgage-linked securities, which left global investors and major financial institutions exposed to billions of dollars of losses. Some powerful critics such as former U.S. Federal Reserve Board chairman Alan Greenspan privately warned for years “that a disaster was waiting to happen” in a real estate sector fed by historically easy access to mortgages, he said. But Wall Street and other regulators turned a deaf ear.

“It was very hard to get reform because there was the perception that if you make mortgages more accessible, you are helping homeowners, but what you're really doing is driving up home prices.”

http://www.theglobeandmail.com/servlet/story/RTGAM.20080912.wrdodge12/BNStory/International/

Everyone knew.

The Emperor Has No Clothes.

[Gregorian]

20. And Asia owns those mortgage backing securities.

I know next to nothing on this subject. However, one has to wonder just what happens when those who actually own the securities are standing there with their hands out.

Oops. Payback time. But then I'm sure it's more complex. There will probably be some form of cushioning. Even the Asian money holders will have some incurred liabilities in this situation.

[wordpix]

24. speaking of which, my friend who works at Fannie says the new head honchos replacements are

all repugs! So no problem, Fannie's taken care of. :sarcasm:

[jhain]

13. He would know since

he is 200 years old, right?

Jerk.

[Duer 157099]

14. Is he Mr. Magoo?

Swear to god, that's who he's acting like, does all this damage and is incredibly oblivious to the role he played in digging us into this hole.

[Odin2005]

15. And you helped to cause it, Green$hit!

What did you expect was going to happen when you cut interest rates to 1% following the Dot.Com bust, you idiot? The result was that he money got pulled out of the crashing tech sector and got put into real estate investments.

The only way to stop these bubbles is to raise the corporate tax rate to at least 30%, anything lower then 30% and you will get bubbles, or so says a friend of mine who is working on a Master's degree in Economics.

[tanyev]

16. Brother, can you spare a dime?

[gratuitous]

19. Heckuva job, Greenie!

I'll bet even old Alan is surprised at all the damage his misguided policies have wrought. Sure took care of that "irrational exuberance" inflicted by the Clinton administration, didn't you Mr. Greenspan?

[natrat]

21. screw him that old shriveled bitch

[TroubleMan]

22. This happens about every 80 years actually.

Tulipomania bubble (1637)
South Sea Bubble (1721)
French Monarchy bankruptcy (1789)
Hamburg Crisis of 1857
1929 Wall Street crash

Notice that 80 years is just a little longer than a human life span. 80 years is just enough time for everybody who was involved or affected by the last crisis to be dead. These crises happen because of lack of regulation. The government basically let the economy go on in any direction with very little rules and limitations. When this happens, the ones with large sums of money start gaming the system. The system gets gamed so much it turns into one big pyramid scheme and eventually crashes.

After the system crashes, the majority cries out and demands stronger regulation of the economy by the government. So the government passes new laws of regulation. However, as time goes on, people die, grow old, and forget how important this regulation was to saving the economy, establishing the middle class, and keeping the economy running smoothly. A new generation comes along, and they weren't involved or affected by the last crisis at all. All they see are these regulations holding them back from making even more money. They see these regulations as hindering the economy, because they either forgot the lessons of the past or weren't told about them. So after awhile, the people vote out a large majority of the regulations, and after about 80 years, the systems crashes again, which brings in another wave of regulations. It happens over and over again.

Again we didn't learn from the past.

[melody]

30. very good post n/t

[calimary]

31. SUPERB post. Makes sense to me. Especially about the generational shifts.

It's just the ups and downs of human nature - a powerful tide through history if ever there was one.

People today and for the last thirty years don't appreciate unions, either, for example. All they see is unions making demands and costing too much. Nobody ever harkens back to WHY unions became necessary in the first place. Because of unfair labor practices, lousy pay, child labor, unsafe conditions, too long hours without a break, no system of redress for grievances, and much more. Unions were needed because the business world shot itself in the foot - pushing to cut costs and cut corners to such an extreme that it was inevitable there'd be a strong, correctional snap-back eventually. If corporate America had behaved responsibly, making profits without squeezing and screwing the workforce, unions would NOT have been necessary. They came into being in response to some rather sinful and short-sighted excess. And GREED.

And people DO forget. All they see and know and want to bother with is the now, this minute. And the old wisdom is too often ignored. Those who don't learn... and all that. It's just too bad they take the rest of us down with them.

REALLY great analysis, TroubleMan. Nails it, and so concisely, too. Wonderful history lesson! Woulda taken me pages of embroidered bullshit to get even close!

:patriot:

[Odin2005]

40. The WW2 Generation would of NEVER let this happen.

It's only after they aged out of power and/or became mere figureheads (like Reagan) during the 1980s that people started ripping out the protections and regulations put in place during or following the Great Depression.

[Eurobabe]

34. Trains' rollin' in the station right on time, eh?

:eyes:

[TroubleMan]

49. Unfortunately.

I wish we could learn from our mistakes, but it seems we never do.

[Odin2005]

39. A message board I post on you might like:

http://www.fourthturning.com/forum

The board is associated with two excellent books called Generations and The Fourth Turning that explain that there is an 80-year-long social cycle.

[TroubleMan]

47. I've read The Fourth Turning

It was a good book.

[Odin2005]

51. Yes it is. I was hopping they would come out with a new edition but...

The main author, political insider and social historian William Strauss, died of cancer a few months ago. Sad that he didn't make it to see Obama (who Strauss really liked) start what he called the "Regeneracy." :-(

[Eurobabe]

55. Thanks for that link. Sounds interesting.

[Loge23]

41. If ever there was a time for change, it's now

What will it take to convince this country that trickle-down doesn't work?
One of the primary functions of a democratic government is to assure that reckless greed, such as this is, does not become epidemic.
Your succinct explanation was right on point and coincides with the passing of the depression/WW2 generation, mentioned elsewhere in this thread.
Not to trivialize this important time in history, but the comic strip "Cathy" has recently been running a most-telling series of strips comparing the lessons of the WW2 generation as (mis)interpreted by today's generation.
In November, we will find out if our most basic flaws - racism and blind hatred - will trump doing what is best for our country's future.

[Canuckistanian]

45. That's very interesting

Did you write a paper on this? Or did you hear it somewhere else?

It kinda makes sense.

[TroubleMan]

48. I got the idea from this website:

http://www.generationaldynamics.com

[Canuckistanian]

50. Thanks! n/t

[Odin2005]

52. I'd stay away from Mr. Xenakis's nonsense. It's a bastardized version of the...

"Fourth Turning" model I mentioned. Us posters on the Fourth Turning message board (especially the posters "Zarathustra," "Milebert," and myself) are constantly criticizing Xenakis's nonsense. The man is a Neo-Con suck-up with a big ego.

[TroubleMan]

53. You can take good ideas from people you don't always agree with.

I was already looking into generational history and regulation/deregulation cycles, and that's the one that laid out the asset bubbles like that. I looked into the crises, why they occurred, and when they occurred, and that theory seemed to check out.

To be honest, I haven't dug much deeper into that website, but the list of crises is taking from that website.

[Guaranteed]

46. It's the American four-generation cycle. And, yes, it's about every 80 years. nt

[brentspeak]

25. And Mr. EZ Credit/Subprime-loan shill Greenspin helped give birth to this disaster

[roamer65]

26. Greenspan bears a large amount of responsibility for this crisis.

He should not have dropped the Fed funds rate to 1% after 9/11. The housing bubble inflated wildly with all that cheap money. We are paying the price now.

[BadgerKid]

27. STFU Greenie.

You've done enough already.

[tabasco]

28. Just a transition to the ownership society, folks.

This is what people asked for when they voted for Cheney/Bush.

They saw Bush call a room full of billionaires his base and still voted for him.

Stupid motherfuckers.

[DBoon]

29. Phil Gramm thinks Alan Greenspan is just whining

McCain's (former) adviser thinks the economy is doing just great and any complaints are whining liberals

He meant YOU, Greenspan

[4lbs]

33. Like father like son.

George W. Bush is the POTUS during the banking and financial crisis along with this mortgage real estate fiasco of 2008.

Guess what happened almost 20 years ago, when his father was POTUS?

Remember the S&L scandal that claimed 500+ banks and financial institutions along with all the bad real estate investments they made that caused their problems? It only helped to plunge the country into a several year-long recession, after 8+ years of GOP mismanagement, and added to a worsening federal deficit back then.

What was the underpinning of both of these financial crises? Deregulation of the banking, S&L, and financial industries.

Wikipedia article regarding the S&L Crisis of almost 20 years ago:

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis


Causes

* Deregulation

* Imprudent real estate lending




Hmm.... sounds very familiar.

[BearSquirrel2]

38. That you caused ...

That you caused asshole (Greenspan)!!!

This whole service economy shit is a house of cards and the house is collapsing.

[Javaman]

43. Greenspaz is banking on the american short attention span..

trying to recaste himself as the seer of wisdom.

Telling himself, "I told me so!!!"

[Strelnikov_]

44. What would Swearengen say . . .

oh, yea, "this is the cocksucker who fucked us in the first place, and now he's acting like some hick who just lost his stake at the card table".

[Neshanic]

54. Like sex with his wife Andrea.....once in a century.