Here is an excerpt from the statement of the US Fed Chairman at the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, Chicago, Illinois; on May 17, 2007
“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”
January 8, 2008:
And now-----Rising Inflation, Rising Unemployment, a Falling USD, Rising GOLD & OIL Prices, Falling US home prices, Falling Consumer Confidence, Subprime fallout affecting financial institutions around the world, Mortgage Crisis, Large write offs at banks, Continuing Credit Crunch & crisis in CDO markets.
Wall Street is now expecting the Fed to cut rates by up to 50 Basis Points when it next meets. President Bush and Treasury Secretary Hank Paulson are meanwhile trying to reassure the world of the resilience of the US economy, promising policies to keep tax rates low and bailout packages for the housing mortgage crisis.
As the fourth quarter results of the US financial sector start to come in, the markets could be in for some turbulent times ahead.