Posted on 08/24/2007 11:25:24 PM PDT by ex-Texan
NEW YORK - Bad credit has supplanted terrorism as the gravest immediate risk threatening the economy, a key national research group reported Monday.
Borrowers' withering ability to pay their bills and the subsequent fallout in the credit markets this summer topped the list of short-term risks on peoples' minds, according to a survey of 258 members conducted by the National Association of Business Economics.
NABE, a Washington-based association, said 32 percent of its surveyed members cited loan defaults and excessive debt as their biggest near-term concern.
Only 20 percent of members cited defense and terrorism as their biggest immediate worry, down from 35 percent when the survey was last conducted in March. Credit risk also topped gas prices, inflation and government spending.
"Financial market turmoil has shifted the focus away from terrorism and toward subprime and other credit problems as the most important near-term threats to the U.S. economy," said Carl Tannenbaum, president of NABE and the chief economist at LaSalle Bank/ABN-Amro.
The market turmoil began earlier this year, when mortgage lenders like New Century Financial Corp. and H&R Block Inc.'s Option One Mortgage Corp. unit reported their clients were missing payments on their home loans more frequently.
This led the Wall Street banks that finance the mortgage market to ultimately pull much of their money out. With cash draining rapidly from the industry, more than 50 lenders have gone bankrupt and a number of investment funds have gone under.
Victims of this flare-up include two of the 10 biggest mortgage lenders in the country and two hedge funds managed by Bear Stearns Cos.
Loan brokers say it has become more difficult for some people to line up mortgages. Subprime loans, or loans to people with spotty credit histories, have all but disappeared as lenders scale back or shut down completely.
The shakeout in the subprime mortgage market forced investors around the world to reassess how much risk they were willing to stomach. This led to an exodus of cash from investments like securities backed by home loans, short-term corporate bonds and stocks whose values were inflated because they were perceived as takeover targets.
In the past five weeks, the stock market has lost 5 percent. The dollar fell to an all-time low versus the euro. A number of companies have had to cancel bond sales because of an absence of buyers.
And, the Federal Reserve has lent billions of dollars to banks from its "discount window," normally associated with bailouts for struggling financial institutions. The Fed this month issued a statement that the risks to the economy have risen considerably and traders ramped up their expectations the Fed would cut targets for interest rates this year.
The tumult in the financial markets has led businesses to revisit their interpretation of the housing boom earlier this decade and the easy credit that fueled it, NABE said. The proportion of surveyed members who call it a "serious national bubble" more than doubled from two years ago to 29 percent, the group said.
NABE said the market turmoil is considered a short-term risk because the five-year outlook for housing is still strong. More surveyed members expect home values to appreciate in the next five years than fall. Very few expect a serious drop in home prices in the next five years.
The greatest long-term risk facing the economy is still health care costs and the medical needs of an aging population, NABE said.
After months of adamant official denial of any potential threat of the subprime mortgage meltdown spreading to the global financial system, the US Federal Reserve (Fed) on Friday, August 17, a mere 10 days after declaring market fundamentals as strong and inflation as its main concern, took radical steps to try to halt financial market contagion worldwide that had become undeniable. * * *Politicians are talking about taking measures to help households suffering from the subprime crisis to prevent as many as 3 million largely low-income households from losing their homes.
However, that will not solve the crisis in the financial markets. In fact it may add to it. But with the central banks pumping in money to help banks from failing, while families are evicted from their homes is very bad politics in a election year.
The central banks are giving financial institutions whose credit rating and cashflow are not much better than family with subprime mortgages, free credit cards with a subsidised interest rate and no spending limit for as long as needed, while these very same institutions are foreclosing on the homes of their customers. This crisis will likely build to a crescendo just before the November presidential election. Its going to be a very interesting election. * * * Source Here
Free trader cheerleaders and proponents of 'buy now, buy today!' just woke up. At least a few have awakened. Easy credit is a thing of the past. But naysayers still proclaim, 'No big deal. Nothing to see here. Time to move on.' Yeah, right.
Please check out my previous posts or my FR Page. I'm going to be adding some intriguing information there from time to time.
*Ping*!
You and I.....18 months ago predicted a verbatim transcript of what is transpiring right now..........
We were “flamed”........last laugh best laugh??
ROTFLMAO!!!!
applesonly5cents; breadlines; depression; despair; doom; dustbowl; grapesofwrath;
Cowardly idiots, all of them. Too afraid to post using their own handles. They taunt and torment from afar hiding behind a cloak of tenuous anonymity. Probably the same miscreants that launched hundreds of hacking attacks (and virus attacks) on me from corporate sites.
Easy explanation: The lending cabal and organized crime want to further feed on the gullible public. The economic tapeworm strikes again.
Nevermind. I just saw that he writes for AP.
“Easy explanation: The lending cabal and organized crime want to further feed on the gullible public. The economic tapeworm strikes again.”
As always, you are correct :-)
Good fishing.......I’m almost there myself.
Everything’s a crisis.
A blind man could see this coming.
NABE said the market turmoil is considered a short-term risk because the five-year outlook for housing is still strong. More surveyed members expect home values to appreciate in the next five years than fall. Very few expect a serious drop in home prices in the next five years.
I think of you as closed minded and hard headed, not blind.
I prefer hard nosed. And in my life I have found that hard times do nto last but hard people do.
a rupture in international risk spreading of a 6000 billion loan market has a flavour...
... tastes like adrenalin.
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