How Bad Is It?

By Birritteri, Reporting Simon | The Independent (London, England), March 18, 2008 | Go to article overview
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How Bad Is It?

Birritteri, Reporting Simon, The Independent (London, England)

As the global markets reel from one calamity after another, nobody can be sure when the turmoil will end. Leading figures from the worlds of finance and economics offer their analysis of the deepening crisis

Alan Greenspan

Former Chairman, US Federal Reserve

"Particularly hard hit will be much of today's financial risk- valuation system. It will eventually fail and a disturbing reality will be laid bare ... It is important, indeed crucial, that any reforms in ... the structure of markets and regulation do not inhibit our ... safeguards against cumulative economic failure: market flexibility and open competition."

Robert Rubin

Former US Treasury Secretary

"I believe the risks are serious enough to call for substantial additional action in the mortgage area, assuming that measures can be adopted that, when the pros and cons are weighed out, are sensible. With respect to economic risk ... I have been around financial markets for a long time and I believe we are in somewhat uncharted waters."

Lawrence Summers

Former US Treasury Secretary

"The underlying illness is serious financial problems and a major credit crunch. That means doing things about mortgages. That means infusing capital into financial institutions. It's a near-certainty [the US] is in a recession and there is a real prospect that it could be a serious one without strong policy action."

Alan Blinder

Former Economic Adviser to President Clinton

"The Fed has been playing the equivalent of Whac-A-Mole as financial turmoil keeps cropping up in unexpected places - yet many of the problems are beyond its reach. Whether we'll have a technical recession remains to be seen. Even if we don't, we're skittering along at very minuscule growth rates."

Terry Smith

Chief Executive, Tullett Prebon

"I have been working in finance in the City and worldwide for 34 years and I have never seen anything like this. I don't think anybody alive has seen events of this seriousness and magnitude affecting the markets ... High interest rates didn't cause this problem, so lowering them isn't going to solve it. It is hard to see exactly what tools the authorities do have."

Vince Cable

Treasury Spokesman, Liberal Democrats

"The longer the credit crunch grips the money markets the more likely it is we will see bank failures and the more serious the repercussions will become on the wider economy. There is now a serious danger that higher costs of borrowing falling on consumers and business will cause an even more rapid slowdown in growth than currently forecast."

George Magnus

Senior Economics Adviser, UBS

"How close is the financial industry to recognising the full value of the writedowns? I'd be surprised if we were more than a third of the way through. Once this gathers momentum it is very difficult to stop. The economic implications are far worse than people think, and the policy solutions far more dramatic."

Richard Bernstein

US Strategist, Merrill Lynch

"The demise of Bear Stearns should be viewed as the first of many.

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