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Thursday, October 23, 2008

Greenspan "shocked" by credit system breakdown

Items of Interest:

I'm shocked, shocked to find that gambling is going on in here! — Claude Rains as Captain Renault in Casablanca. Said as a croupier hands Renault a pile of money.
Greenspan "shocked" at credit system breakdown -- Former U.S. Federal Reserve Chairman Alan Greenspan told Congress on Thursday he is "shocked" at the breakdown in U.S. credit markets and said he was "partially" wrong to resist regulation of some securities.

Despite concerns he had in 2005 that risks were being underestimated by investors, "this crisis, however, has turned out to be much broader than anything I could have imagined," Greenspan said in remarks prepared for delivery to the House of Representatives Committee on Oversight and Government Reform.

"Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief," said Greenspan, who stepped down from the Fed in 2006...
NY Times:
Greenspan: Bad data hurt Wall Street computer models

LA Times: Greenspan's blind spot
Sidney Morning Herald: Humiliation for high priest of US capitalism
Globe & Mail [Canada]: Greenspan admits 'mistake' on bank regulation
BBC: Financial crisis 'like a tsunami'
NY Times: Greenspan Concedes Error on Regulation
CBS News: Greenspan Sees "once In A Century" Crisis
Bloomberg: Greenspan Was `Cheerleader for Imprudence,' James Grant Says

Chris Good / The Hill's Blog Briefing Room: DAY'S END ROUNDUP
Anthony Gregory / LewRockwell.com Blog: Greenspan Does Damage Even When Retired
Greenspan Concedes to ‘Flaw’ in His Market Ideology -- Former Federal Reserve Chairman Alan Greenspan said a ``once-in-a-century credit tsunami'' has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed...
Easy Al: Alan Greenspan admits mistakes on bank regulationFlashback (did anyone see a problem coming at the peak of the housing bubble?):
The Johnsville News, October 26, 2005:
God Bless Alan Greenspan - Will we miss you? -- Did a "Greenspan Effect" cause the global warming of the financial markets? . . .

Some astute financial forecasters believe a bad "hurricane season" is brewing in the warm frothy waters of the financial markets that Greenspan is leaving as his legacy. Will an unexpected category 5 financial crisis hit the newly appointed Fed chief, Ben Bernanke, squarely in the chops? . . .

Will the first big financial storm during Bernanke's term be named Hurricane Alan? Anyway, it sounds like you may need to sell your house and move to high ground. Or at least get your boots on and have your bailing buckets ready.

TJN: Greenspan's Bubbles
At Amazon.com: Bill Fleckenstein/Fredrick Sheehan - Greenspans Bubbles
Bear Stearns $30 billion mortgage portfolio falls 9 percent -- A Bear Stearns mortgage portfolio backed by the U.S. government racked up $2.7 billion of losses in the third quarter, amounting to a 9 percent decline on about $30 billion of assets, the Federal Reserve said Thursday.

Roughly $2 billion of those losses will be borne by the U.S. taxpayer. As of the end of September, the portfolio, originally worth about $30 billion, was worth $26.8 billion...
Graham Summers / Kitco.com:
Passing Argentina... On Our Way to Weimar -- Things are about to get very tricky.

Throughout the last year the regulators—the Federal Reserve, Treasury Dept, SEC, and even Congress—have done everything they can, including some things they weren’t legally authorized to do, to try and stem the deflationary tide of the US housing market. However, ALL of their efforts have failed. The Case-Shiller Home Index—a general measure of housing values in the US—has fallen 18% from its June 2006 peak. And if anything, the drop is now accelerating—the index fell 8% in all of 2007… it’s already fallen 7% in the first nine months of 2008.

It’s now getting to the point that the Fed has no other option than hyperinflation. And by hyperinflation, I mean the dollar as a currency is toast. As disturbing as this option sounds, it’s already happening...
Housing Wire:
Home Prices to Fall Another 10 Percent: Fitch -- The U.S. housing market correction is seventy-five percent complete, according to a report released earlier this week by Fitch Ratings; analysts at the firm projected that home prices would fall another 10 percent from current levels nationally, with some areas seeing more severe remaining price corrections.

To date, national home prices have declined by 22 percent from their peak in 2006; Fitch’s peak-to-trough expectation is for prices to decline by 30 percent from the peak price achieved in 2006 (the additional 8 percent decline represents a 10 percent decline from today’s levels). The rating agency thinks that most of this correction will be incurred in the next several quarters, with prices exhibiting more stability beginning in 2010.

Most of the price declines expected have occurred ...

Calculated Risk

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