Alan Greenspan said today that The credit squeeze and mortgage meltdown has brought on a “once-in-a-century” financial crisis that is likely to claim more big firms.
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.”
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.
While recent declines in the prices of oil and food may help avert a recession, he said, “I wouldn’t put my money on it.”
This weekend Bank of America passed on Lehman Brothers and bought Merrill Lynch instead for $44 Billion Dollars.
Barclay Bank also passed on Lehman over the weekend.
Lehman has reported nearly $7 billion in losses in just the past six months and seems to be out of options for companies willing to buy it.
Moreover after the government bailed out Freddie and Fannie last week, they do not seem to be interested in doing the same for Lehman.
This leaves Lehman, the 4th largest investment bank, in a position where they may have to liquidate.
A.I.G., one of the world’s largest insurers, may need to raise $30 billion to $40 billion to avoid a severe downgrade to its credit rating and possible failure
Gee Alan.
Nice of you to get so smart and wise now; after all those years when you and your buddies were running the show…including (among many other easy/stupid loans you decided were safe & sound) letting lenders make nothing down home loans to folks who were at least years away from being truly qualified–if ever–to buy their own homes.
Thanks for far, far worse than nothing.
This is definitely history in the making. Financial giants over 150 years old are about to be liquidated (Lehman), acquired (Merril) or having its assets sold off (AIG). Those firms all survived the Great Depression and two world wars. The only positive I got out of that whole interview was that the bottom is near (early 2009).
I don’t know what the future holds micro or macroeconomically and I can only relate it personally as what to do in this environment. I thought about going all in either tomorrow or sometime this week given the Lehman news as I expect a huge drop in the stock market tomorrow. I’m now thinking Jan/Feb 2009 will be even more attractive.
Tony
As I have said before, the economy has a while to go before the recovery begins.
Time and cash are on your side.
So are income streams.
Nice we have domains
Agreed 100%, Mike.
Things go up so they have to come down.
When people in the USA lose their jobs as many Firms move their operations to Country’s like China / India and others in the name of profits and adding more $ value to the share holders / investors that is the outcome.
In the next 2 years many more Firms will go bust – this is the begining.