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[Yaya]

The United States is mired in a "once-in-a century" financial crisis which is now more than likely to spark a recession, former Federal Reserve chief Alan Greenspan said Sunday.

The talismanic ex-central banker said that the crisis was the worst he had seen in his career, still had a long way to go and would continue to effect home prices in the United States.

"First of all, let's recognize that this is a once-in-a-half-century, probably once-in-a-century type of event," Greenspan said on ABC's "This Week."

Asked whether the crisis, which has seen the US government step in to bail out mortgage giants Freddie Mac and Fannie Mae, was the worst of his career, Greenspan replied "Oh, by far."

"There's no question that this is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go," Greenspan said.

"And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes.

"That will induce a series of events around the globe which will stabilize the system."

Greenspan was also asked whether the United States had a greater-than 50 percent chance of escaping a recession.

"No, I think it's less than 50 percent.

"I can't believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring."

The former Federal Reserve chairman also predicted that the financial crisis would see the failure of more major financial institutions, even as embattled Wall Street investment giant Lehman Brothers scrambled to find a buyer.

"In and of itself that does not need to be a problem.

"It depends on how it is handled and how the liquidations take place. And indeed we shouldn't try to protect every single institution."

On Saturday, Democrat Barack Obama's campaign seized on a warning from Greenspan about John McCain's tax plans to portray the Republican as economically reckless.

In an interview with Bloomberg Television Friday, Greenspan said the nation could not afford 3.3 trillion dollars of tax cuts proposed by McCain without matching cuts in spending.

Greenspan, a long-time friend of McCain and a Republican, said about the Arizona senator's plans to extend massive tax cuts imposed by President George W. Bush: "I'm not in favor of financing tax cuts with borrowed money."

McCain has said he would pay for his cuts by ending pet funding projects for US lawmakers' districts known as "earmarks."

http://www.breitbart.com/article.php?id=080914181841.fsmkqu8s&show_article=1

[sigmundsmith]

This is the thing that I can't understand about Americans/America.

Supposedly one of the most powerful ecocomic forces on the planet but political ideology ends up crippling such a strong economy and affects the global financial market.

Obama/Biden does not have all the answers but McCain/Palin have none. And those who believe the republicans do have the answer please post, I believe they will all be shot down.

The first thing that Bush did was spending billions of dollars to invade a country that didn't attack America. The supposed financial rewards have not come to fruition (spl?).

Now, it seems that the concept of socialism only focuses multi-national's (as they are the big financial contributors to political parties).

It seems that Republican politics has become more of a socialist political movement for capitalism rather than protecting the needs and interests of the average American.

I am not American but I can see the devestation that neo-conservative politics has done on the globe.

Obama: "Enough".

And I think most people around the world feel that as well.

If only American citizens will wake up and pay attention.

[aka Dave]

The ignorant rednecks are bent on driving the country into the ground. Well, at least we can watch from afar.

[jim_we]

[nuthatch]

[Join Me]

I am American and I see the financial carnage that George Bush has brought on America quite clearly. I scratch my head everyday trying to figure out why so few Americans can see the painful and obvious truth. I think mostly it comes from fear and denial. Nobody wants to believe that the financial condition of the country is now about equal to that of the average American.

[Beeyee]

Greenspan spelling out the crisis that he helped to create. Priceless.

[nene]

So what should this do to the Won-Dollar exchange rate?

[Join Me]

[Bigfeet]

This is not a one-in-a-century event. It happened already in 1929 . I expect the dollar to get weaker because of this so the won should get stronger.

[Socks]

[CabbageTownRoyals]

and now this.....
does not bode well

http://www.nytimes.com/2008/09/15/business/15lehman.html

In one of the most dramatic days in Wall Street�s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.

The humbling moves, which reshape the landscape of American finance, mark the latest chapter in a tumultuous year in which once-proud financial institutions have been brought to their knees as a result of hundreds of billions of dollars in losses because of bad mortgage finance and real estate investments.

But even as the fates of Lehman and Merrill hung in the balance, another crisis loomed as the insurance giant American International Group appeared to teeter. Staggered by losses stemming from the credit crisis, A.I.G. sought a $40 billion lifeline from the Federal Reserve, without which the company may have only days to survive.

The stunning series of events culminated a weekend of frantic around-the-clock negotiations, as Wall Street bankers huddled in meetings at the behest of Bush administration officials to try to avoid a downward spiral in the markets stemming from a crisis of confidence.

�My goodness. I�ve been in the business 35 years, and these are the most extraordinary events I�ve ever seen,� said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration.

It remains to be seen whether the sale of Merrill, which was worth more than $100 billion during the last year, and the controlled demise of Lehman will be enough to finally turn the tide in the yearlong financial crisis that has crippled Wall Street and threatened the broader economy.

Early Monday morning, Lehman said it would file for Chapter 11 bankruptcy protection in New York for its holding company in what would be the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago, the Associated Press reported.

Questions remain about how the market will react Monday, particularly to Lehman�s plan to wind down its trading operations, and whether other companies, like A.I.G. and Washington Mutual, the nation�s largest savings and loan, might falter.

Indeed, in a move that echoed Wall Street�s rescue of a big hedge fund a decade ago this week, 10 major banks agreed to create an emergency fund of $70 billion to $100 billion that financial institutions can use to protect themselves from the fallout of Lehman�s failure.

The Fed, meantime, broadened the terms of its emergency loan program for Wall Street banks, a move that could ultimately put taxpayers� money at risk.

Though the government took control of the troubled mortgage finance companies Fannie Mae and Freddie Mac only a week ago, investors have become increasingly nervous about whether major financial institutions can recover from their losses.

How things play out could affect the broader economy, which has been weakening steadily as the financial crisis has deepened over the last year, with unemployment increasing as the nation�s growth rate has slowed.

What will happen to Merrill�s 60,000 employees or Lehman�s 25,000 employees remains unclear. Worried about the unfolding crisis and its potential impact on New York City�s economy, Mayor Michael R. Bloomberg canceled a trip to California to meet with Gov. Arnold Schwarzenegger. Instead, aides said, Mr. Bloomberg spent much of the weekend working the phones, talking to federal officials and bank executives in an effort to gauge the severity of the crisis.

The weekend that humbled Lehman and Merrill Lynch and rewarded Bank of America, based in Charlotte, N.C., began at 6 p.m. Friday in the first of a series of emergency meetings at the Federal Reserve building in Lower Manhattan.

The meeting was called by Fed officials, with Treasury Secretary Henry M. Paulson Jr. in attendance, and it included top bankers. The Treasury and Federal Reserve had already stepped in on several occasions to rescue the financial system, forcing a shotgun marriage between Bear Stearns and JPMorgan Chase this year and backstopping $29 billion worth of troubled assets � and then agreeing to bail out Fannie Mae and Freddie Mac.

The bankers were told that the government would not bail out Lehman and that it was up to Wall Street to solve its problems. Lehman�s stock tumbled sharply last week as concerns about its financial condition grew and other firms started to pull back from doing business with it, threatening its viability.

Without government backing, Lehman began trying to find a buyer, focusing on Barclays, the big British bank, and Bank of America. At the same time, other Wall Street executives grew more concerned about their own precarious situation.

The fates of Merrill Lynch and Lehman Brothers would not seem to be linked; Merrill has the nation�s largest brokerage force and its name is known in towns across America, while Lehman�s main customers are big institutions. But during the credit boom both firms piled into risky real estate and ended up severely weakened, with inadequate capital and toxic assets.

Knowing that investors were worried about Merrill, John A. Thain, its chief executive and an alumnus of Goldman Sachs and the New York Stock Exchange, and Kenneth D. Lewis, Bank of America�s chief executive, began negotiations. One person briefed on the negotiations said Bank of America had approached Merrill earlier in the summer but Mr. Thain had rebuffed the offer. Now, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, the two parties proceeded with discussions.

[justaguy]

Don't kid yourselves about The United States. Markets have their ups and downs. It's called a business cycle.

America is going to be just fine.

[Join Me]

[Beeyee]

Yes Americans please educate yourselves about the private federal reserve that is bankrupting your country.

Unfortunatly most Americans i meet have no idea about this issue and can't care less about it. It seems the deliberate dumbing down of their country as per the club of Rome documents is coming true.