Posted on 11/05/2007 10:12:44 PM PST by NormsRevenge
NEW YORK (Reuters) - The U.S. economy might be edging toward a recession in the wake of mortgage-related credit woes plaguing the financial markets, bankers and analysts said on Monday.
"I think that the risk of a recession is greater than people realize," James Dunne, chief executive of Sandler O'Neil & Partners, said at the Reuters Finance Summit in New York.
With home prices dropping, more people about to lose their homes due to unaffordable mortgages and sharply higher oil prices, the economy could be on the brink of slowing down, they said.
"I think there is a serious risk to the economy," Howard Lutnick, CEO of Cantor Fitzgerald, told the summit.
Charles Peabody, partner at New York-based research firm Portales Partners LLC, said the Fed may have to take more aggressive action and drop the benchmark fed funds rate in an effort to prevent a Japanese-style economic stagnation, which eventually evolved into a deflationary recession.
"We're moving into a recession, and over time -- the length of which is difficult to predict -- there is going to be a lot more credit problems," he said.
Preliminary data released by the U.S. government last week showed that the gross domestic product grew by 3.9 percent in the third quarter, compared with 3.8 percent in the previous quarter and 0.6 percent in the first three months of this year.
Last week the Fed announced at the end of a two-day meeting of its policy-setting Federal Open Market Committee that it was reducing its federal funds rate a quarter percentage point to 4.5 percent, citing its expectation that "economic expansion will likely slow in the near term" because of the housing sector's problems.
The Fed noted that growth was "solid" in the third quarter and said it thought financial-market strains were easing, but still opted for some insurance to add stimulus.
When asked where the U.S. economy is headed over the next year or so, John Duffy, chairman and CEO of Keefe, Bruyette & Woods, said at the summit: "In the toilet."
With the recent data and Fed moves, Wall Street firms believe the Fed will be forced to reduce interest rates on loans to banks to 3 percent, or even as low as 1 percent, at least over the next year.
Duffy said Fed action alone will not cure what ails the U.S. economy and financial institutions, which are experiencing a liquidity squeeze in the markets for credit and other financial products.
"I don't think they (the Fed) have a silver bullet,' he told Reuters.
(Additional reporting by Jennifer Ablan and Anupreeta Das)
With home prices dropping, more people about to lose their homes due to unaffordable mortgages and sharply higher oil prices, the economy could be on the brink of slowing down, they said.
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with respect to the oil prices,,
Thanks to all the environmentalists and their legislative minions who have hamstrung this country for years from pursuing energy policy that allowed for development of enegry sources here that are in abundance but off limits ..
on a side note, if the worst comes to pass,
to all those who went to Washington and ran up massive debt, I hope you all lose your a$$eS and seats when the bottom drops out,, and a pox on you all.
Let’s look:
GDP up 3.9% vs forecasts of 3.2%
Payroll jobs up 160K vs forecasts of 80K.
Yeah, looks like we’re heading for recession.
But only if you are a Democrat.
Jimmy Carter, George H.W. Bush and Bill Clinton all saw recessions in their last year of office.
Yes, one should keep in mind there is an election next year, so one would expect the left and media lapdogs to do all they can to stir up fear and chaos.
and remember, the dems are now the party of the rich and would likely suffer the largest losses were a recession to occur. ;-)
The MSM does ... elect Hillary and they will stop talking down the economy.
It seems that something is happening - people just aren’t spending like they did last year.
It’s just the little things that are noticable - like the waiter at the resort restaurant who told me that business has been dropping every month for the past year. (His girlfriend works in the next city south, and is hurting for tips.) Both restaurants were ‘reservations only’ a year ago.
The hairdresser said that people are waiting longer between cuts.
The florist said orders have been dropping substantially.
The grocery manager has seen a drop in sales of non-necessities.
The clerk at the drug store is also seeing make-up and perfume sales drop.
Maybe these things don’t mean a lot to big corporations - but they do to those who are trying to make a living in the real world of ‘ma and pa’ businesses.
I see recession coming for Wall Street Firms...
Lose some billions here, lose some billions there, debt goes to junk, clients are mad....
I oversee marketing for an online retailer. Our business has never been better. We sell DIY home improvement products (intercoms, security video systems, central vacuums, etc.) and business is booming. We keep expecting a slowdown, but so far so good, we’re not complaining.
And if we do have a recession, like the last one, we’ll be out of it before they realize we had one...
I do wonder though, what all the ramifications of the housing market will be. I’ve heard that every housing correction has led to recession. Maybe this time is different, but I doubt that considering just how big this housing problem is compared to the recent r/e corrections?
That is very good news. In fact, I could be your next customer. Freepmail me with your website, if you would, please. Thanks! yorkie
Yes, and all 3 were followed by a President of the opposition party. We better get busy, or we might get Hillary....
“I’ve heard”?
Can you cite a reputable source for that?
I’ve heard that the moon is made of green cheese . . . .
I haven't figured out why yet but I suspect we're at full employment and people are too busy to start new businesses ?
Next time you buy a clue buy a good one.
It is in the financial best interests of wall street money men to promote a downturn since they make as much selling short as long and the market is at an all time high with little upside left.
Stagnant market = no profits for John Duffy...
I trust that you at least look forward when driving.
And the Demo’s answer is to raise taxes! Denver has one of the largest forecloser rates, but Mayor Chickenlooper has nine tax increases on the ballot. Proposal A is a property tax increase that increases every year forever. That will sure help homeowners who are barely holding on. Denver always approves tax increases because 60% of the people don’t pay taxes. They are under the poverty level.
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