Greenspan warns of capital shortfall
I know you've just been staying up nights wondering when you would hear from him again, but Federal Reserve Chairman Alan Greenspan emerged yesterday to issue his latest thoughts on the economy. According to Bloomberg, Greenspan stated that the U.S. economy and financial markets "had improved," but he warned that banks face a capital shortfall. Greenspan believes that this shortfall could stall lending and obstruct a recovery.
Good old Greenie started off gently enough, noting that, "Things have unquestionably improved ... everywhere in the world. It's remarkable." However, the tone quickly turned bearish, as Greenie noted, "There is still a very large unfunded capital requirement in the commercial banking system in the United States and that's got to be funded."
Greenspan also believes that there is still potential for an additional mortgage crisis and that the current financial crisis is not over. The former Fed chair stated, "Until the price of homes flattens out, we still have a very serious potential mortgage crisis." Greenspan also advised of the risks arising from the current slump in home prices, adding that prices will only stabilize once the liquidation rate of single-family homes peaks -- which hasn't happened yet. The Bloomberg article finished with Greenie estimating that U.S. gross domestic product will decline at an annual rate of one percent in the second quarter.
I have no problem with economists issuing opinions about the current economic state, but is anyone else tired of hearing from former Fed Chief Greenspan? Honestly, ole Greenie has had some excellent points to add to the economic discussion in the past -- but at some point it becomes an attention-seeking behavior. Look at me, folks! I'm Alan Greenspan, Former Fed Chair, and I have to make what I think are relevant comments on the economy!
Let's not diminish what Greenspan did in the past. There was a time when many considered him one of the great economic thinkers and policymakers of the past century. Unfortunately, he is becoming akin to the renowned preacher that retired and is now resigned to standing on the street corner at the local college, preaching about the evils of drink and promiscuity. Apparently Greenie has a need to feel relevant, but I feel that he may be cheapening his legacy by simply not letting go.
It is time for him to let the current Fed Chairman do his job, even if he doesn't like the job he's doing. Greenie, allow yourself to be the former Fed Chairman. Let Bernanke have the stage, and if you feel like catcalling, do it over dinner and drinks with your friends.
Of course, this isn't all Greenie's fault. It is time for the media to stop stirring the pot. (After all, it isn't watchable news unless CNBC, Fox Business or some financial periodical can grab Greenie disagreeing with Bernanke.) Give the man a break, and in this case I'm talking about Bernanke. His job is tough enough without the ghost of Fed Chairmen past hanging over his shoulder telling the whole world what he's doing wrong.