Greenspan: Worst Global Crisis Ever -By Far, Recovery "Unbalanced"
Bloomberg:
Greenspan Says Crisis ‘By Far’ Worst, Recovery Uneven
Feb. 23 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the financial crisis was “by far” the worst in history and called the recovery from the global recession “extremely unbalanced.”
The world economy has undergone “by far the greatest financial crisis globally ever,” Greenspan said today in a speech to the Credit Union National Association’s Governmental Affairs Conference in Washington.
Greenspan said that while the economy was in worse shape in the Great Depression, the recent financial crisis was potentially more harmful than that in the 1930s because [that event] “never had short-term credit literally withdrawn.”
Greenspan said that the gross domestic product may recover to the level of previous peaks earlier this year, even though traditional drivers of growth such as housing starts and motor vehicles were “dead in the water.” He also said small businesses show few signs of improving because lenders are struggling with commercial real estate mortgages.
The “extremely unbalanced recovery” is being led by high- income consumers and large businesses that are benefiting from a recovery in stock prices, he said.
The Standard & Poor’s 500 Index fell 1.3 percent to 1,096.01 at 1:27 p.m. in New York. That level is 62 percent higher than the closing value of 676.53 on March 9, 2009, the lowest level since the financial crisis began.
Greenspan said that the financial system is “not yet to the point where the capital positions of the largest banks is built up to where they’re freely lending.”
Bank Lending
Earlier this month, the Fed’s survey of senior loan officers said that banks continued to tighten terms of loans in the fourth quarter of 2009.
Greenspan also said “fiscal affairs are threatening this outlook” for recovery, as Congress and the White House face difficulty raising taxes or cutting spending. He said that every day he checks the interest rate on 10-year Treasury notes and 30-year Treasury bonds, calling them the “critical Achilles Heel.”
The financial crisis was caused by a “fundamental misjudgment in the marketplace,” Greenspan said. Greenspan defended markets, because other forms of economic organization are worse.
Greenspan said he wants the subprime mortgage market to return. “I hope we can find a way of resurrecting the subprime market,” because it was working well until those mortgages were widely securitized, he said.
To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net
Last Updated: February 23, 2010 14:01 EST
Greenspan Says Crisis ‘By Far’ Worst, Recovery Uneven
Feb. 23 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the financial crisis was “by far” the worst in history and called the recovery from the global recession “extremely unbalanced.”
The world economy has undergone “by far the greatest financial crisis globally ever,” Greenspan said today in a speech to the Credit Union National Association’s Governmental Affairs Conference in Washington.
Greenspan said that while the economy was in worse shape in the Great Depression, the recent financial crisis was potentially more harmful than that in the 1930s because [that event] “never had short-term credit literally withdrawn.”
Greenspan said that the gross domestic product may recover to the level of previous peaks earlier this year, even though traditional drivers of growth such as housing starts and motor vehicles were “dead in the water.” He also said small businesses show few signs of improving because lenders are struggling with commercial real estate mortgages.
The “extremely unbalanced recovery” is being led by high- income consumers and large businesses that are benefiting from a recovery in stock prices, he said.
The Standard & Poor’s 500 Index fell 1.3 percent to 1,096.01 at 1:27 p.m. in New York. That level is 62 percent higher than the closing value of 676.53 on March 9, 2009, the lowest level since the financial crisis began.
Greenspan said that the financial system is “not yet to the point where the capital positions of the largest banks is built up to where they’re freely lending.”
Bank Lending
Earlier this month, the Fed’s survey of senior loan officers said that banks continued to tighten terms of loans in the fourth quarter of 2009.
Greenspan also said “fiscal affairs are threatening this outlook” for recovery, as Congress and the White House face difficulty raising taxes or cutting spending. He said that every day he checks the interest rate on 10-year Treasury notes and 30-year Treasury bonds, calling them the “critical Achilles Heel.”
The financial crisis was caused by a “fundamental misjudgment in the marketplace,” Greenspan said. Greenspan defended markets, because other forms of economic organization are worse.
Greenspan said he wants the subprime mortgage market to return. “I hope we can find a way of resurrecting the subprime market,” because it was working well until those mortgages were widely securitized, he said.
To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net
Last Updated: February 23, 2010 14:01 EST