Alan Greenspan

Re: Alan Greenspan

Postby winston » Tue Aug 05, 2008 9:09 am

Real Estate: Why Greenspan Is Right This Time
by Alexander Green

I've disagreed with some of the things that former Fed Chairman Alan Greenspan has said and done over the years.

But what he said last week – that falling home prices in America are "nowhere near the bottom" – you can take to the bank.

This may surprise some, especially since the national media just reported the single largest year-over-year drop in U.S. home prices, May's record 15.8% plunge.

But over the past several months, I've spent time looking at residential real estate in cities large and small. I've been to areas that have held up relatively well, like Dallas, TX and Asheville, NC. And visited places that have been crushed, like Orlando, Las Vegas and Miami.

I've talked to realtors, appraisers, homebuilders and mortgage brokers. And I've come away with one overriding impression: Home sellers still don't get it.

From 1999 to 2006, we experienced the wildest housing boom in U.S. history. Prices skyrocketed relative to building costs, personal income, population growth and inflation.

In other words, home prices didn't soar for any sound fundamental reason. They soared because of low interest rates, easy credit and a $500,000 capital gains tax exemption. (Animal spirits, in other words.)

While there have been exceptions in some high-growth areas of the country (like Manhattan and Southern California), homes are ordinarily steady but unspectacular long-term investments. According to Freddie Mac, U.S. home prices have climbed 6.2% a year over the past 30 years.

To see just how unusual recent price activity has been, take a look at Yale economist Robert Shiller's inflation-adjusted housing chart, going back more than a century.

As you can see, no one alive today has ever seen anything like the run-up of the past few years. But now the bloom is off the rose.

For starters, the economy is in the tank. That puts fewer consumers in the mood to make a big-ticket purchase. And homes are the biggest of them all.

Then there is the state of the housing market itself. Foreclosures are at record levels. And we will see new records in the months ahead as variable mortgages reset higher and prices drift lower.

Inventory keeps piling up. Nationally, lackluster sales have created an 11-month supply of unsold homes.

Mortgage rates are rising. Two weeks ago, the national average for a 30-year mortgage surpassed 6%, a 52-week high.

Banks and other mortgage lenders have raised their standards, too. In recent years, even borrowers with spotty payment histories were able to choose among a juicy selection of no-money-down, interest only, adjustable rate, negative amortization, "pick-your-payment" mortgages.

But now credit is tight. My brother, a homebuilder, says that even if you can find a buyer, good luck getting to closing. Many buyers either can't come up with the down payment or fail to qualify for a mortgage under new guidelines. That means homes under contract are routinely coming back onto the market.

In short, it really is ugly out there.

Put all these factors together – a weak economy, declining home prices, higher mortgage rates, tougher lending standards and rising home inventory – and you'd think that home sellers would slash prices.

But they haven't. At least, not enough. Not yet.

Realtors keep telling me the same story. They are increasingly frustrated with sellers who simply refuse to face the music. (And every week a new batch of listings shows up at "you-must-be-joking" prices.)

No one likes to take a loss, of course, or to realize a smaller gain than anticipated. But understand that potential buyers do not care what we paid for our homes or how much they were "worth at the top."

The bubble is over. Magical buyers are not going to appear and pay us what we could have gotten three years ago.

Nor, I'll lay long odds, is the housing market going to "bounce back" anytime soon. (If you think so, please refer back to the Shiller chart.)

I'm not gloating, incidentally. I own two houses myself and they are mired in the same quicksand as yours.

I'm only pointing out that it's too early to speculate on a rebound. And smart sellers are better off accepting a reasonable offer rather than waiting for a turnaround that is years away.

The national housing market will bottom – and we'll see the recovery that follows – when supply and demand come back into balance.

And as Greenspan pointed out last week, we're nowhere near that now.
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Re: Alan Greenspan

Postby winston » Thu Aug 14, 2008 10:49 pm

Greenspan sees US house price bottom in 2009

Former Federal Reserve Chairman Alan Greenspan predicts U.S. house prices will begin to stabilize in the first half of next year, even as he faulted the government's rescue of mortgage market giants Fannie Mae and Freddie Mac, the Wall Street Journal reported.

"They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted... as five or 10 individual privately held units,'' which the government would eventually auction off to private investors, Greenspan told the paper.

In a high-profile rescue orchestrated in mid-July, the federal government offered to buttress Freddie and Fannie, the two largest providers of US home mortgage funding.

REUTERS
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Re: Alan Greenspan

Postby kennynah » Thu Aug 14, 2008 10:54 pm

our friend still around ah ?
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Re: Alan Greenspan

Postby millionairemind » Fri Oct 24, 2008 10:08 am

Just finishing up on his book The Age of Turbulence. I guess under his watch, the market was a WALK IN THE PARK compared to what Ben B. has to go thro' :lol:

Greenspan admits mistakes in 'once in a century credit tsunami'
Alan Greenspan, the former US Federal Reserve chairman, has for the first time admitted to mistakes in his regulation-lite free-market ideology – but stopped short of taking the blame for what he termed as a "once in a century credit tsunami."


By James Quinn, Wall Street Correspondent
Last Updated: 12:14AM BST 24 Oct 2008
Mr Greenspan, who ran America's central bank for 19 years until 2006 using a largely deregulatory ethos, admitted that the current crisis has turned out to be "much broader than anything I could have imagined" admitting that he remains in a state of "shocked disbelief" as to the events of the past 14 months.

Speaking before the House of Representative's Government Oversight committee, the former central banker explained how the crisis "morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount."

However he did not take the blame for recent events, which have been arguably been exacerbated by regulatory lapses which allowed institutions to gear up substantially without putting the necessary regulatory capital to one side.

Mr Greenspan was the subject of a considerable grilling during the hearing, in which a number of Congressman criticised him for his role in not foreseeing the current crisis, which was kick-started by a collapse in the US sub-prime mortgage market.

Democratic Congressman Henry Waxman, who chairs the influential committee said that the Fed had the "authority to stop the irresponsible lending practices that fuelled the sub-prime mortgage market."

Mr Greenspan said that he had been concerned about the dangers in the mortgage market, particularly the under-pricing of risk, since 2005.

Mr Waxman went further, however, and asked the former Fed chief whether he was wrong about the benefits of deregulation, to which Mr Greenspan responded "partially."

He went to admit that the "flaw" in the assumptions he used over the past 40 years were that banks and other financial institutions were best able to protect the interest of their shareholders.

The ex-central banker also issued a clear warning that the worst is far from over for the US economy, predicting a significant rise in lay-offs and unemployment and a "marked retrenchment of consumer spending."

He also said that for the crisis to end, house prices will have to stabilise, some which is "still many months in the future."

That prediction was echoed in the latest housing figures, which showed that house prices dropped by 5.9pc in August – the biggest fall since 1991 – while foreclosure filings rose by 71pc in the third quarter compared to a year ago, to the highest level on record.

Meanwhile, at a separate Capitol Hill hearing, Federal Deposit Insurance Corporation chairman Sheila Bair said she is working closely with the US Treasury to devise a new $40bn (£24.7bn) plan to encourage mortgage companies to modify loans to assist those on the verge of losing their homes.

"Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards," she said. "By doing so, unaffordable loans could be converted into loans that are sustainable over the long term."

US Treasury Interim Secretary for Financial Stability Neel Kashkari confirmed the Treasury is working on new policies to prevent foreclosures.
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Re: Alan Greenspan

Postby LenaHuat » Sat Oct 25, 2008 2:55 pm

Maybe it shld be "The (S)Age of Turbulence" :!:
Previously, he generated so much turbulence in most of his congressional sittings. Few understood what he said. This recent hearing was the first one I could understand his thoughts well enuff.
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Re: Alan Greenspan

Postby sidney » Sat Oct 25, 2008 3:09 pm

A man worth respecting is one who dares to own up and clarifies his experiences in light of global turmoil.
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US - Economic Data & News (Feb 09 - Apr 09)

Postby millionairemind » Wed Feb 18, 2009 4:33 pm

Feb 18, 2009
Nationalise US banks

NEW YORK - THE US government may have to temporarily nationalise the country's banks until the sector is reformed, the former chairman of the US Federal Reserve, Alan Greenspan, has said.

In an interview with the Financial Times published on the paper's website on Tuesday, Mr Greeenspan said 'it may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring'.

Long one of the world's most powerful proponents of hands-off financial regulation, Mr Greenspan indicated nationalisation may now be necessary.

'I understand that once in a hundred years this is what you do,' he said. Widely hailed while in office, Mr Greenspan has seen his legacy tarnished since he stepped down in 2006, as critics accuse him of failing to head off the current economic malaise.

'In some cases, the least bad solution is for the government to take temporary control,' he said.

Mr Greenspan's call came as President Barack Obama on Tuesday proclaimed he had begun the work of saving the American dream, as he signed into law a historic US$787-billion (S$1.2 trillion) bill designed to rescue the US economy.

But US stocks plunged on fears the mammoth bill, a new plan to tackle mortgage foreclosures expected on Wednesday and a fresh effort to save decrepit US automakers would not be enough to end the worst economic slump since the 1930s.

Mr Obama, on a visit to Colorado, put his name to what he termed the 'most sweeping' recovery package in US history, which cleared Congress less than a month into his presidency, but with negligible Republican support.

'We have begun the essential work of keeping the American dream alive in our time,' Mr Obama said.

The president, who has been warning darkly of economic 'disaster' without quick government action, adopted a more hopeful tone as he signed the bill, which may have deep implications for the success of his presidency.

But US stocks plunged as investors worried whether government action would save the ailing economy, with the Dow Jones Industrial Average down 297.41 points (3.79 per cent) to 7,553.00 at the closing bell. -- AFP
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Re: Alan Greenspan

Postby winston » Sat Mar 14, 2009 8:30 am

Greenspan's latest column

From Dow Theory Letters:

Greenspan again -- It's becoming painful to listen or read Alan Greenspan's constant squirming as he seeks to rewrite his incredible mistake in creating the disastrous the housing bubble. In yesterday's WSJ, Greenspan again claims that he "didn't do it." I was disgusted to see the Greenspan piece headlined, "The Fed Didn't Cause the Housing Bubble." Greenspan hides behind "the Fed." Of Course, Alan Greenspan was "the Fed." The title should have read "I, Alan Greenspan, didn't cause the housing bubble."

In his slimy fake apology, Greenspan resorts to ridiculous English. Sample from his apology: "The appropriate policy response is not to bridle financial intermediation with heavy regulation. That would stifle important advances in finance that enhance standards of living. Remember, prior to the crisis, the US economy exhibited an impressive degree of productivity advance......Adequate capital and collateral requirements can address the weaknesses that the crisis has unearthed."

Russell comment -- I ask, you, what the hell is Greenspan talking about? What a load of gibberish. He's trying to impress and overwhelm us with his erudition. C'mon, Maestro, at long last admit it -- you messed up the world by allowing and encouraging a housing bubble.
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Re: Alan Greenspan

Postby LenaHuat » Fri Mar 27, 2009 5:12 pm

Posted this cuz it's my position too:
LONDON (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan recommends graduated capital requirements for banks to cut back their size.

"New regulatory challenges arise because of the recently proven fact that some financial institutions have become too big to fail as their failure would raise systemic concerns," he writes in Friday's Financial Times.

"The solution is to have graduated regulatory capital requirements to discourage them from becoming too big and to offset their competitive advantage."
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Re: Alan Greenspan

Postby millionairemind » Fri May 22, 2009 9:49 am

Published May 22, 2009

Financial crisis not over yet, says Greenspan
Banks need more money, mortgage crisis still serious



(NEW YORK) Former Fed chairman Alan Greenspan signalled that the financial crisis has yet to end even as borrowing costs tumble, warning that US banks must raise 'large' amounts of money.

'There is still a very large unfunded capital requirement in the commercial banking system in the United States and that's got to be funded,' Mr Greenspan said in an interview yesterday in Washington. He also said that 'until the price of homes flattens out, we still have a very serious potential mortgage crisis'.

Mr Greenspan's comments suggest that he sees a bigger capital shortfall in the banking system than reflected in regulators' stress tests on the 19 biggest US lenders. Treasury Secretary Timothy Geithner told lawmakers on Wednesday that banks have issued more than US$56 billion in new stock or debt since the tests found 10 firms needed to raise about US$75 billion.

A lack of capital at banks may inhibit lending to consumers and businesses, tempering any economic recovery. The former Fed chief said that the continued slump in home prices is putting at risk millions of borrowers.

Home prices will only start to stabilise once the 'liquidation' rate of single-family homes has peaked, he said. 'I don't think we're there yet.'

More broadly, 'things have unquestionably improved' across the economy and financial markets, he said.

The London interbank offered rate, or Libor, for three-month US dollar loans fell three basis points on Wednesday to 0.75 per cent, the British Bankers' Association said, the 35th straight drop. The Libor-OIS spread, a gauge of banks' reluctance to lend, narrowed to 55 basis points, the least since February 2008. It was as high as 364 basis points in October.

That's an 'extraordinary improvement', said Mr Greenspan, who last year said that the credit crisis would be at an end once the Libor-OIS spread narrowed past 25 basis points. 'Virtually all of the various credit spreads, not only in the US but globally, have come down.'

Alan Blinder, a former Fed vice-chairman, also said that 'if there are no more reversals, history will judge that by May 2009, we will have passed the worst of the crisis.'

'My current guess would be in terms of GDP the second quarter will be a bottom and by the third quarter we're eking out a positive,' he said.

Mr Greenspan agreed, estimating that US gross domestic product will decline at an annual rate of one per cent in the second quarter.

Members of the Fed's Open Market Committee who met in Washington April 28-29 saw 'some signs pointing towards economic stabilisation', and some officials detected prospects for 'a trough' in the housing market's downturn, according to minutes of the meeting released on Wednesday in Washington.

Fed governors and district-bank presidents project that the economy will shrink 1.3-2 per cent this year and grow 2-3 per cent in 2010, according to median estimates released on Wednesday. -- Bloomberg
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