Watching Paulson was sickening today. We got the old "everything is OK" spin. I think I have heard this speech about ten times by now.
Greenspan Doesn't think everything is ok!
This shook the markets late in the day.
"July 31 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said falling U.S. home prices are ``nowhere near the bottom'' and the resulting market turmoil isn't showing signs of abating.
While the odds of a recession are 50-50, achieving stable markets will ``take a while,'' Greenspan said today in a CNBC interview.
`Major Accident'
Fannie Mae and Freddie Mac, the largest sources of money for U.S. home loans, are a ``major accident waiting to happen,'' Greenspan said. ``The solution'' is the ``nationalization'' of the companies, a restructuring involving an infusion of taxpayer money and eventual sale back to the market as ``five or 10 separate entities,'' he said.
Washington-based Fannie Mae dropped 71 cents, or 5.8 percent, to $11.50 in New York Stock Exchange composite trading. Freddie Mac, based in McLean, Virginia, fell 56 cents, or 6.4 percent, to $8.17.
``It's important that we focus on stabilizing the financial system,'' Greenspan said.
Policy makers also need to reconcile slowing economic growth with rising prices, he said. The U.S. faces ``a very substantial change in the balance between growth and inflation.''
The Fed had to open up lending to securities firms to curb turmoil in financial markets, he said. ``You have to do the backstop because once you get to that point your particular choices are very limited.''
Still, Greenspan said he was ``uncomfortable'' with aspects of the Bear Stearns Cos. rescue. ``That is a fiscal policy operation, essentially something which should be set up in the Treasury Department."
My Take:
It looks to me like Greenspan sounds a little worried. I love how the guy who created this is now trying to throw stones. Ohh the irony!
So Hank says everything is fine while Greenspan looks like a deer in the headlights. Who do you believe? You know my answer.
The jobless claims # went through the roof today hitting a 5 year high:
"Jobs Concern
The S&P 500 trimmed its rebound from an almost three-year low on July 15 to 4.3 percent. The 448,000 increase in jobless claims weighed on stocks as investors await tomorrow's government report forecast to show the nation lost 75,000 jobs in July."
Uh oh!
Be afraid whenever you see the jobless claims get above 400,000. How can people pay their bills when they aren't working?
Feel free to yell at Paulson below if all of this makes you angry! Better yet, show up at the next protest! Here he is avoiding protestors as he walked to his truck.
If things keep going the way they are, there may be several thousand people at his next speech.
2 comments:
The government will not solve this problem by providing yet more loans for stronger parties to buy the existing supply of homes otherwise in foreclosure. The dream is to keep housing high-priced to support the mortgage lenders, not for prices to fall so that new buyers do not need to run so heavily into debt to afford housing.
From Michael Hudson, on Counterpunch. You should read the whole article.
thanks anon
THats why the dream won't work. You can't keep housing high priced and support the lenders when no one can qualify to buy them.
The lenders would be much brighter if they simply took their losses and allowed prices to fall to the point where demand would pick up.
Its so simple yet the bankers refuse to want to take their medicine.
The economy is going to implode if the lenders don't wake up.
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