Former Federal Reserve Chairman Alan Greenspan said the worst of the credit crisis will pass once investors “fully'' anticipate the likely losses on securities tied to subprime and other mortgages, where defaults have surged.
“The worst of the credit crisis is over if we assume that current market prices for subprime and Alt-A securities have fully discounted the ultimate losses that will emerge,'' Greenspan said in remarks distributed by his office today.
Delinquencies have climbed among borrowers with subprime or Alt-A mortgages, designed for those with poor or limited credit histories, causing more than $323 billion of writedowns and losses since January 2007. Greenspan said the value of mortgage- backed debt ultimately depends on how much equity homeowners have in their houses, making the outlook for property prices critical.
“House prices still have a long way to fall,'' Greenspan said. “It is possible, but unlikely they will stabilize by year- end.''
Home prices in 20 U.S. cities fell in February by the most on record, the Standard & Poor's/Case-Shiller home price index showed on April 29. The measure dropped 12.7 percent from the same month last year.
New York Conference
Greenspan made the remarks on the credit crisis to the Alternative Public Strategies Conference in New York yesterday, according to Lisa Panasiti, his spokeswoman in Washington cash advance loans quick payday loan. Reporters were allowed to listen to the speech yesterday only on condition the remarks not be reported.
The former Fed chairman's office distributed the remarks today after Reuters reported yesterday that he said the worst of the credit crisis was over, citing unidentified people who attended the New York event.
Greenspan said in an interview last week that the economy is in a “tug-of-war'' between the financial crisis and relative stability among non-financial firms that are flush with cash. He judged that the U.S. has slipped into an “awfully pale recession.''
Economists anticipate the economy will grow at a 0.1 percent annual rate from April to June, the least since the 2001 recession, according to a monthly survey by Bloomberg News published today. Gross domestic product rose at a 0.6 percent pace in both the first quarter and the final three months of 2007.
Greenspan, 82, served as Fed chairman from August 1987 to January 2006. Since then, he has given regular speeches, written a bestselling book and begun advising clients including Deutsche Bank AG. The paperback version of “The Age of Turbulence,'' including a new chapter on the credit crisis, is scheduled for publication in August.
Cablevision Systems Corp. says it is buying the Sundance Channel for about $500 million.
The New York-area cable TV provider already owns several other cable networks including the IFC movie channel and AMC, which won acclaim last year for its original series "Mad Men."
Cablevision (CVC, Fortune 500) said Wednesday that it plans to keep the Sundance Channel operating separately.
The Sundance Channel is owned by General Electric Co.’s (GE, Fortune 500) NBC, CBS Corp payday loan payday loan. (CBS, Fortune 500) and actor-director Robert Redford.
European retail sales dropped 1.6 percent in March from a year earlier, the most since at least 1995 and twice as much as economists forecast, as soaring fuel and food costs sapped consumer spending.
Retail sales in the euro area declined 0.4 percent on the month, the European Union's statistics office in Luxembourg said today. Economists had forecast a 0.7 percent annual decline, according to the median of 20 estimates in a Bloomberg News survey.
The European Central Bank governing council, which meets tomorrow to set interest rates, has refused to follow its counterparts in the U.S. and the U.K. in cutting interest rates, arguing that domestic demand will help sustain economic growth. Now, the surge in food and crude-oil prices, which has focused policy makers' attention on inflation, is also undermining consumer sentiment.
“This is pretty grim,'' said Ken Wattret, senior economist at BNP Paribas in London. “The big picture has been very weak for some time and up until this point the ECB has been in denial. They keep on cheerleading the improvement in consumption, but it simply hasn't happened.''
The euro extended losses following the report, falling as much as 0.5 percent to $1.5451 internet payday loans fast cash now. It traded at $1.5467 at 11:42 a.m. Brussels time.
`Many Challenges'
Retailers have “never before faced so many challenges,'' Jose Luis Duran, chairman of Carrefour SA, the world's second- biggest retailer, said April 9. “Inflation is a big issue.''
The increase in costs is outstripping the gain in prices charged by retailers, he said.
Ikea, the largest home-furnishings seller, is cutting back expansion plans as economic growth slows and prices increase, Chief Executive Officer Anders Dahlvig said the same day.
Even unemployment at a record low has failed to spur spending. Confidence among households in France dropped to a record low last month, while a European Commission index of sentiment in the euro area also fell in April.
Retail sales in France declined 0.8 percent in March from the year-earlier month, while sales in Germany, Europe's biggest economy, dropped 1.1 percent, today's report showed.
The European Central Bank is winning Europe's political leaders over to its policy of focusing on fighting inflation even as economic growth slows.
Politicians from France, Belgium and Luxembourg, who previously complained that the ECB paid too little attention to economic growth, have signaled increasing concern that inflation is eating away at voters' incomes.
“There isn't much appetite for having these inflation levels, whether you're the monetary authority or government,'' Robert Barrie, chief European economist at Credit Suisse Group in London, said. “There's a recognition that inflation is too high and broader-based support for the ECB to do something about it.''
The ECB has refused to follow the U.S. Federal Reserve and Bank of England in lowering interest rates after inflation surged since August, to reach a 16-year high of 3.6 percent in March. The bank argues that rising prices are a bigger threat to economic growth than the increase in credit costs resulting from the collapse of U.S. subprime mortgages.
The Frankfurt-based central bank is expected to leave the benchmark refinancing rate at a six-year high of 4 percent when policy makers meet in Athens on May 8, according to all 53 economists surveyed by Bloomberg News. The same day the Bank of England will probably leave its key rate at 5 percent after three cuts since December, a separate survey shows.
Less Isolated
ECB President Jean-Claude Trichet said at a meeting of European Union finance ministers in Brdo, Slovenia, that he felt less isolated in his fight against inflation.
“Those living on 300, 400, 500, 600, 700 euros can't live with runaway inflation,'' Luxembourg Finance Minister Jean-Claude Juncker said at the same meeting, where demonstrators protested against price increases. He had opposed the ECB rate increases when they started in December 2005.
As regards inflation, “the responsibility is not only put on central bankers, but also on governments,'' Juncker said on May 2.
Soaring food prices have led to political unrest around the world, with Egyptian police clashing with demonstrators and Haitian Prime Minister Jacques Edouard Alexis ousted. The World Bank says 33 countries risk suffering civil disturbances.
“Food prices are an issue everywhere for two reasons,'' ECB council member Erkki Liikanen told reporters at a central bankers' meeting today in Basel, Switzerland. “The first reason is that they have an impact on inflation. The second reason is that they impact on the situation of many poor people around the world.''
Inflation Concern
United Nations figures showed food was 57 percent more expensive globally in March than a year ago as economic growth in emerging markets such as China, India and Russia pushed up demand for commodities guaranteed payday loan pay day loans. The price of rice has doubled in the past year and wheat has climbed 65 percent. The price of crude oil has increased 78 percent.
Belgian Finance Minister Didier Reynders, who told Les Echos in October that the ECB should consider lowering rates if economic growth slows, suggested inflation concerns are now more pressing.
“We have a concern about inflation due to oil prices, also food prices,'' he said April 3. “It is important for monetary policy to do something.''
Some economists say the change of heart won't last.
“I would not expect the conversion of some leaders to the fight against inflation to last too long,'' said Laurent Bilke, an economist at Lehman Brothers International in London, who used to work as a forecaster at the ECB. Support will only hold for “as long as inflation remains the main concern for households, but will wane as signs of the economic slowdown intensify,'' he said.
`Incredible' Euro
French Prime Minister Nicolas Sarkozy returned to complaining about the euro's “incredible'' level on April 24, after fretting in February that the quickening pace of inflation “worries'' him because it lowers people's living standard.
“The ECB must have broader functions, with a majority deciding, to go beyond controlling inflation,'' Italian Prime Minister Silvio Berlusconi told reporters in Rome April 16 after winning last month's general election.
The widening interest-rate gap between the euro area and the U.S. sent the euro to a record $1.60 on April 22. The Fed has lowered interest rates seven times since September, to 2 percent, aiming to prevent a recession.
The world's biggest financial companies have posted at least $319 billion in writedowns and credit losses since the start of last year as the market for mortgages aimed at people with poor credit histories collapsed.
The cooling U.S. economy and the stronger euro are starting to take their toll on Europe. Manufacturing growth slowed for a third month in April and confidence in the economy dropped to the lowest level since August 2005.
Slowing economic growth may not necessarily bring down inflation, according to some ECB officials. Governing Council members Juergen Stark and Yves Mersch have suggested in the past three weeks that rates may not be high enough to contain inflation. Consumer prices in April rose 3.3 percent from a year earlier, breaching the ECB's 2 percent limit for an eighth month.
“The ECB has become the anti-inflation machine we wanted,'' Juncker said April 28.
The drop in the U.S. unemployment rate in April partly reflected a jump in part-time workers, raising concern businesses are still scaling back, economists said.
The number of Americans saying they worked part-time last month due to economic reasons — either because their hours were cut or they couldn't find full-time work — jumped to 5.22 million from 4.91 million in March, the Labor Department reported today. That helped the jobless rate unexpectedly fall to 5 percent from 5.1 percent.
The 19 percent increase over the last six months in the number of people not working a full day because of slack business conditions is the biggest in six years. Fewer hours and smaller pay increases, just as food and fuel prices surge, may continue to undermine consumer spending.
“With goods employment still declining sharply, hours worked down, and part-time employment up, this report can't be taken as a signal that the economy is out of the recession woods,'' Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts, said in a note to clients.
Consumer spending advanced at a 1 percent annual pace in the first quarter, the Commerce Department said April 30. That was the smallest gain since the last recession seven years ago.
Along with the drop in the unemployment rate, derived from a survey of households, today's government report also showed payrolls shrank by a smaller than forecast 20,000 workers. The latter is based on the Labor Department's poll of businesses.
Market Reaction
The figures pushed up yields on U.S. Treasury securities as traders bet the Federal Reserve will see less need to lower borrowing costs instant payday loan paydayloan.
Other components from the report were less reassuring. The measure of unemployment that includes those working part-time for economic reasons rose to 9.2 percent in April, a three-year high, from 9.1 percent.
Wage gains were also meager. Average hourly earnings rose just 0.1 percent, pushing the increase in the year ended in April down to 3.4 percent higher, the smallest since January 2006.
“The weak labor income numbers in an environment of rising headline inflation present yet another challenge for the consumer spending outlook and put even more burden on the tax rebates to support outlays,'' Michael Feroli, an economist at JPMorgan Chase & Co. in New York, said in a note to clients.
Rebate Checks
The government started sending out tax rebate checks this week as part of its fiscal stimulus plan. Also this week, Federal Reserve policy makers lowered the benchmark overnight lending rate between banks by a quarter percentage point, to 2 percent, in a bid to revive the economy.
Economists surveyed by Bloomberg News last month forecast consumer spending, which accounts for two-third of the economy, would rise an average 0.5 percent in the first half of the year, the smallest two-quarter gain since the six months that ended March 1991.
Recent reports indicate spending weakened at the start of the second quarter. Cars and light trucks sold at a lower-than- forecast 14.4 million annual pace in April, the fewest since 1998, according to industry figures issued yesterday.
Manufacturing in the U.S. contracted for a third consecutive month in April, as sales slowed and investment faltered, economists said before a report today.
The Institute for Supply Management's manufacturing index probably fell to 48 from 48.6 in March, according to the median estimate of economists surveyed by Bloomberg News. A reading of 50 is the dividing line between contraction and expansion.
Manufacturers, which account for 12 percent of the economy, are cutting back as surging fuel and food costs and a loss of jobs cause consumers and businesses to retrench. Only gains in exports are preventing factories from stumbling even more as growth almost stalls.
Manufacturing “hasn't collapsed, but it certainly has weakened,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “The manufacturing number is going to be weaker rather than stronger in the next few months.''
Forecasts of the 78 economists surveyed ranged from 45.5 to 50. The Tempe, Arizona-based ISM will release the report at 10 a.m. New York time.
Other reports today are forecast to show consumer spending has slowed, firings have picked up and spending on construction projects is down.
Household spending, which accounts for more than two-thirds of the economy, probably rose 0.2 percent in March after a 0.1 percent gain a month earlier, economists project an 8:30 a.m. report from the Commerce Department will show. The two-month increase in purchases would be the smallest in more than a year.
Construction Declines
Another Commerce report at 10:00 a.m. is forecast to show that investment in building projects dropped 0.7 percent in March. While home construction has fallen for more than two years, builders have now also begun cutting back on commercial projects such as shopping malls and offices.
The number of workers filing first-time claims for jobless benefits probably rose to 365,000 last week from 342,000 a week earlier, economists estimate a Labor Department report at 8:30 a.m. will show.
The deepest housing recession in a generation is pushing the U.S. to the brink of a recession http://savingpaydayloans.com cashadvance. The economy expanded at a 0.6 percent annual pace in the first quarter, matching the prior quarter's rate, the Commerce Department reported yesterday.
The economy would have shrunk at a 0.2 percent pace if not for a gain in inventories that contributed 0.8 percent to growth.
No Collapse
So far, manufacturing has done better than in past downturns. While the ISM's factory index has been falling, it's still well above the 42.1 reading reached in February 2001, a month before the start of the 2001 recession.
Growing overseas demand is preventing manufacturing from sinking even more. The U.S. trade deficit shrank in the first quarter to the lowest level in more than five years on record exports, Commerce reported yesterday.
Government reports have shown the slowdown in manufacturing isn't deepening. Industrial output rose 0.3 percent in March following a 0.7 percent decline in February, according to Fed data. Orders for durable goods excluding transportation equipment rose more than forecast, the Commerce Department said last week.
The Federal Reserve yesterday cut its benchmark rate by a quarter point and said the housing contraction and tight credit were “likely to weigh on economic growth'' for the next few quarters. Policy makers also indicated they were ready to pause after seven rate cuts since September.
Auto Sales Down
Industry figures today are forecast to show sales of cars and light trucks fell in April at a 15 million annual pace, according to analysts and economists surveyed. Vehicles sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998.
Carmakers have been at the epicenter of the slowdown in manufacturing. Detroit-based General Motors Corp., the world's largest automaker, said this week it's cutting output of large pickup trucks and sport-utility vehicles by about 10 percent this year at four plants in the U.S. and Canada because of slowing sales.
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