Housing bust means at least 12 more months of pain
Reuters
By Jennifer Ablan - Analysis
NEW YORK (Reuters) - It was only nine months ago that pundits, investors and government officials, argued that the U.S. subprime mortgage crisis had been "contained." So they were wrong.
The implosion of the subprime mortgage market has been rampantly spreading throughout the economy, slamming consumers, banks, investors, even state and local governments to a degree unforeseen by most pundits and analysts and yes, U.S. Federal Reserve officials.
And it ain't over: it could last another 12 months, sucking the life out of lending, driving layoffs, and spurring company bankruptcies and bank failures. Some argue a recession has already begun and it could last for some time.
The depth of the crisis hasn't been hit yet if a new study by several prominent economists is correct concluding that unless financial markets can quickly recapitalize, banks are likely to cut back their lending to consumers and businesses by nearly $1 trillion. That will slash economic growth by more than a percentage point over the next 12 months, said the study by David Greenlaw of Morgan Stanley, Jan Hatzius of Goldman Sachs, Anil Kashyap of the University of Chicago, and Hyun Song Shin of Princeton University, released Friday.
Read more at Reuters.
By Jennifer Ablan - Analysis
NEW YORK (Reuters) - It was only nine months ago that pundits, investors and government officials, argued that the U.S. subprime mortgage crisis had been "contained." So they were wrong.
The implosion of the subprime mortgage market has been rampantly spreading throughout the economy, slamming consumers, banks, investors, even state and local governments to a degree unforeseen by most pundits and analysts and yes, U.S. Federal Reserve officials.
And it ain't over: it could last another 12 months, sucking the life out of lending, driving layoffs, and spurring company bankruptcies and bank failures. Some argue a recession has already begun and it could last for some time.
The depth of the crisis hasn't been hit yet if a new study by several prominent economists is correct concluding that unless financial markets can quickly recapitalize, banks are likely to cut back their lending to consumers and businesses by nearly $1 trillion. That will slash economic growth by more than a percentage point over the next 12 months, said the study by David Greenlaw of Morgan Stanley, Jan Hatzius of Goldman Sachs, Anil Kashyap of the University of Chicago, and Hyun Song Shin of Princeton University, released Friday.
Read more at Reuters.
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