“Consumers have record debt, home prices are falling, jobs are harder to come by, we’re paying more at supermarkets and the gas pump than we have in a long time,” said Russ Koesterich, senior portfolio manager at Barclays Global Investors. “It’s a combination of events that is finally starting to take a toll.” ...
... The mounting losses reported by banks as these securities continued to go bad, as well as uncertainty about the extent of the damage and the impact of dried-up credit, sent stocks in the sector sharply lower and dragged down the rest of the market, too. “What we heard in the first quarter was the sound of credit crunching everywhere and the effects that that had on a wide variety of markets, including mutual funds,” said P. Brett Hammond, chief investment strategist at the fund manager TIAA-CREF. ... New York Times ...
We're whistling. We're singing. We're looking brave.
But some of the best overseers of our financial markets are not. They're scared and they back up their worry with real knowledge of the market and how Congress (and this administration ... and the previous administration) created a situation in which no one knows for sure what going to happen.
What we now see is the widespread use of the "r" word -- recession -- which was avoided for so long. What's less heard -- but it's there -- is the "d" word. You know the one. It's the word they avoid when they talk about this being the worst recession "since World War II." Note how they avoid any references to the period immediately before the war.
You'll wish we were in the hands of considerably more competent people than the ones Michael Greenberger talks about here:
Q: The Fed bailed out Bear Stearns with the explanation that if it didn’t if would have been disastrous for the American economy and possibly for the global economy. Do you think that’s a legitimate argument?
Michael Greenberger: I absolutely think it is a legitimate argument! There’s no doubt about it. If Bear Stearns had collapsed, it would have been a house of cards. Others would have collapsed. It wouldn’t have just been a US problem, it would have been a worldwide problem. The point is, don’t put us in the position where somebody is too big to fail. There was an interesting article in the New York Times, roughly about December 21, 2007, called “The Fed Shrugged.” It’s a play on Ayn Rand’s “Atlas Shrugged.” Alan Greenspan, when he was there, and Bernanke now, have been warned about this not just by anybody but also by other people in the Bush administration – that, as early as 2001, we had a crisis on our hands. If the federal government had acted responsibly, this would not have happened. We would be in a very good economy now with job growth and income growth. But yes, that’s why when people tell you this is the worst economic crisis since World War II, that’s a way of not saying the panicky thing, which is that we may be heading for a depression. If a Bear Stearns collapses, you’re going back to 1929. It’s not just Bear Stearns, it’s a house of cards. That’s what we don’t know. Is Bear Stearns the end? That’s why the market went up so much earlier this week on the belief that Bear Stearns is the end. Some of us are very worried that Bear Stearns is the beginning and not the end. If we needed $30 billion to bail out Bear Stearns and there are others that start collapsing and need to be rescued so we don’t go into a total abyss, it’s going to be a major crisis. They did the right thing when they faced the ultimate crisis. Where they were wrong is not responding to the clear signals going all the way back to 2001 that this was going to happen if the Fed didn’t intervene sooner.
For more on the financial outlook, on Greenberger and on why the word "depression" may not be an exaggeration, read the full interview at The Scribe.
