Greenspan calls crisis the worst ever

Argentina News.Net
Monday 15th September, 2008

Former US Federal Reserve chief Alan Greenspan has referred to the current financial crisis in the United States as a 'once-in-a-century' event.

Speaking on ABC television, Greenspan that the crisis was the worst he had seen and still had a long way to go, but it was a rare event.

During the interview, Greenspan said:
'There's no question that this is in the process of outstripping anything I've seen. It will continue to be a corrosive force until the price of homes in the United States stabilises. That will induce a series of events around the globe which will stabilise the system.'

When asked if the US had a greater-than 50 percent chance of escaping a recession, Greenspan said, 'No, I think it's less than 50 percent.'

He said: 'I cannot believe we could have a once in a century type of financial crisis without a significant impact on the real economy, globally. I think that is, indeed, what is in the process of what is occurring.'

The former head of the US Federal Reserve said even more institutions could face insolvency.

After leading the U.S. central bank from 1987 until two years ago, Alan Greenspan remains one of America's influential voices on economic matters.

Greenspan says America's current financial climate, in which the Federal government has felt compelled to seize control of two mortgage giants and engineer the takeover of a major investment firm, is unlike anything he has ever seen before.

Earlier this year, the Federal government provided an emergency loan to investment giant Bear Stearns, and helped engineer the selling of the firm to a rival corporation.

Last week, the Bush administration took over two government-sponsored private mortgage firms, Fannie Mae and Freddie Mac, to rescue them from insolvency.

Greenspan said endless government rescues are not a good idea.

'We should not try to protect every single institution. The ordinary cost of financial change has winners and losers, to the extent that bailouts are draws on our scarce savings supply, you undermine the growth of the economy, and ultimately you get stagnation,' said Greenspan.

But the former fed chief did say that some firms and institutions warrant assistance.

e said: 'There are certain types of institutions which are so fundamental to the functioning of the movement of savings into the real investment in an economy that on very rare occasions - and this is one of them - it is desirable to prevent them from liquidating in a sharply disruptive manner.'

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