Alan Greenspan’s Take

From interview on ABC News with Alan Greenspan, September 15, 2008:

How much worse is this going to get?
“First of all, let us recognize that this is a once in a half century, probably once in a century type of event.”
Worse you’ve ever seen on your career?
“Oh, by far. There’s no question that this is in the process of outstripping anything that I’ve seen, and it still is not resolved and it has a way to go and indeed it will continue to be a corrosive force until the price of homes in the United States stabilizes. That will induce a series of events around the globe which will stabilize the system.”
And you think this will happen early next year?
“That is my best guess, in the sense that I’ve always argued that with this excess level of single-family vacant homes for sale, that excess does not have to be completely removed to get prices to stabilize. But, you have to get the rate of liquidation of those inventories at a pace which causes the market structure to stabilize. Once that happens, then the equity on homes in the United States becomes clear, and that of course is the ultimate collateral for the mortgage-backed securities issued from the United States that have spread around the world.”

Are we going to see any more of these major financial institutions fail?
“I suspect we will… and indeed we shouldn’t try to protect every single institution. The ordinary course of financial change has winners and losers.”

One suggestion has been made, is that the power of short-sellers here is really quite pernicious, and some have said that perhaps the government should step in and suspend the short selling in these financial institutions until the market can stabilize. Is that a good idea?
“A very bad idea. Because what the short-sellers add to the system is a more realistic view of pricing. Cause remember, short-sellers, by nature, are not those with investments in a particular company. And if you only have those with investments in a particular company and only those who are sympathetic to it in the market, you’ll get distortions which will ultimately create far more problems than allowing short-sellers in, which improves the liquidity of the system, enables adjustments to take place, enables prices to be finely determined, because it is only when you get clarity in prices that markets stabilize.”

Greenspan also mentioned support for government intervention in the cases of Bear Stearns and Fannie Mae and Freddie Mac (despite his obvious free economy slant), saying we must remember that this is an unusual situation (‘once in a century’).

The general sentiment is that Greenspan is responsible for the crisis in the first place (ref. Dean Baker and Tim Iacono) and the above interview has been termed ‘The Arsonist Analyzes the Fire’. The gist: the subprime crisis is Greenspan’s ‘legacy’ by his own admission – the result of his oversight when he was chair of the Fed.

Black Monday

• Dow drops 500 points
• S&P 500 lowest ever since Sept 11, 2001 attacks
• Lehman Brothers files for bankruptcy
• Merrill Lynch sold to Bank of America for $50 billion
• AIG in desperate need of capital

Just a year ago, Merrill was trading at 70, Lehman at 60 and AIG at 65. They now trade at $17.05, $0.21 and $4.76 respectively.

Housewifedom

Am feeling very pleased with myself now because I just did my first domestic goddess act of the term: cooking eggs with ham and cheese for breakfast! Granted the omelette was a little brown (instead of golden yellow) and more like scrambled eggs instead. But still, happiness is… cooking a simple breakfast for you and your roommate.

It is very gratifying to see a shell of an apartment slowly become a home, as Sam and I have done over the past few days.

[Update: Followed up by cooking lunch. It turned out okay, minus the fact that 1st attempt at the vegetable sauce triggered the smoke alarm. Disclaimer: I used frozen wontons and the soup was made using shrimp stock. Haha also note that the dishes in the picture are half-eaten because hunger set in before camwhoring instincts did.]

Lunch

Back To School

Back in Ann Arbor. 3rd day of school. After 2 trips to Meijer and 5 days of unpacking, our new apartment begins to be habitable, albeit with cardboard boxes still strewn across the living room floor.

Meanwhile, the news has never been more interesting:

USA – McCain picks Palin as running mate, which draws flak – nothing like the warm media reception given to Biden. Against Palin: her remarking that she doesn’t know what a VP does and lack of experience. For Palin: carrying a down syndrome child to term and daughter’s teenage pregnancy (for some reason people are choosing to focus on the decision not to abort the baby rather than the parenting aspect – possibly because teenage pregnancy is so ubiquitous that its occurence does not merit censure?). A Huffington post article was even titled “John McCain Hands the Democrats a Gift”. After the runaway success that was the DNC, can the Republicans come back from this gaffe?

Malaysia – Leaked medical reports show that Anwar’s aide was not raped (potentially clearing him of sodomy charges?)

Singapore – Tang Wee Sung charged for illegally attempting to purchase organs, sentenced to 2 hours in jail and a $7,000 fine. At first glance the sentence seems light, but then we realize that it is only so because of Tang’s dire medical condition (he only has 1-2 years left to live, suffers from a host of medical problems ranging from kidney failure to heart disease to sleep apnoea and requires 50 pills/injections daily as well as a nurse by his side). It is unfortunate how such a spectacle has been made of a dying man’s desperate attempt to live. Who has he really hurt in the process?