Independent UK: The financial crisis: How bad is it?

[marmar]

The financial crisis: How bad is it?
As the global markets reel from one calamity after another, nobody can be sure when the turmoil will end. Leading figures from the worlds of finance and economics offer their analysis of the deepening crisis
Tuesday, 18 March 2008


Alan Greenspan, former chairman, US federal reserve

"Particularly hard hit will be much of today's financial risk-valuation system. It will eventually fail and a disturbing reality will be laid bare ... It is important, indeed crucial, that any reforms in ... the structure of markets and regulation do not inhibit our ... safeguards against cumulative economic failure: market flexibility and open competition."

Robert Rubin, Former US Treasury Secretary

"I believe the risks are serious enough to call for substantial additional action in the mortgage area, assuming that measures can be adopted that, when the pros and cons are weighed out, are sensible. With respect to economic risk ... I have been around financial markets for a long time and I believe we are in somewhat uncharted waters."

Lawrence Summers, former US treasury secretary

"The underlying illness is serious financial problems and a major credit crunch. That means doing things about mortgages. That means infusing capital into financial institutions. It's a near-certainty is in a recession and there is a real prospect that it could be a serious one without strong policy action."

Alan Blinder, former economic adviser to President Clinton

"The Fed has been playing the equivalent of Whac-A-Mole as financial turmoil keeps cropping up in unexpected places – yet many of the problems are beyond its reach. Whether we'll have a technical recession remains to be seen. Even if we don't, we're skittering along at very minuscule growth rates."

Terry Smith, chief executive, Tullett Prebon

"I have been working in finance in the City and worldwide for 34 years and I have never seen anything like this. I don't think anybody alive has seen events of this seriousness and magnitude affecting the markets ... High interest rates didn't cause this problem, so lowering them isn't going to solve it. It is hard to see exactly what tools the authorities do have."

Vince Cable, treasury spokesman, Liberal Democrats

"The longer the credit crunch grips the money markets the more likely it is we will see bank failures and the more serious the repercussions will become on the wider economy. There is now a serious danger that higher costs of borrowing falling on consumers and business will cause an even more rapid slowdown in growth than currently forecast."

George Magnus, senior economics adviser, UBS

"How close is the financial industry to recognising the full value of the writedowns? I'd be surprised if we were more than a third of the way through. Once this gathers momentum it is very difficult to stop. The economic implications are far worse than people think, and the policy solutions far more dramatic."

Richard Bernstein, US strategist, Merrill Lynch

"The demise of Bear Stearns should be viewed as the first of many. Assets remain overvalued, earnings momentum is weak and sentiment is catching on as to how broad and deep the credit market bubble has been. In the 1989-1991 cycle, about 25 per cent of financial sector companies went away via merger, acquisition, or bankruptcy."

Stephen Lewis, economist, Insinger de Beaufort

"Many of the biggest market makers in the credit area have been severely damaged and that has severely reduced their capacity to take risk, any sort of risk. Capital is very scarce because so much of it has gone to fund the write-downs. Managers are very averse to taking any kind of position in the market that might go the wrong way and wipe out a bit more of their capital."

Nouriel Roubini, Professor of economics, Stern Business School

"This is the most radical change and expansion of Fed powers and functions since the Great Depression: essentially it now can lend unlimited amounts to non-bank, highly leveraged institutions that it does not regulate. ... the Fed is taking serious financial risks." ...........(more)

The complete piece is at: http://www.independent.co.uk/news/business/analysis-and-features/the-financial-crisis-how-bad-is-it-797119.html

[sharesunited]

1. To the extent that the Federal Reserve is

"saving" American capitalism with taxpayer funds and the People are not getting an ownership interest in the institutions which would otherwise fail, this is a big fat public ripoff of every damn one of us.

[AwareOne]

2. It's the same old trick, privatize the profits

socialize the losses. We the people have now bailed out the auto industry, the airline industry, the railroads, the savings and loan industry, and now the investment banking industry. We should all be part owners of all the above. Our experiment in democracy has failed, overwhelmed by capitalism.