Tags: greenspan | banks

Greenspan: Banks Not Out of the Woods

By Dan Weil   |   Thursday, 21 May 2009 03:34 PM

Former Federal Reserve Chairman Alan Greenspan says banks haven’t emerged from all their woes yet.

While the economy is beginning to bounce back, U.S. financial institutions still need to raise a lot of capital, he told Bloomberg News.

“There is still a very large unfunded capital requirement in the commercial banking system in the U.S., and that’s got to be funded,” Greenspan says.

The recent stress tests conducted by the government found that 10 big banks need to add $75 billion in capital.

There is still work to be done in the housing sector too, Greenspan maintains. “Until the price of homes flattens out, we still have a very serious potential mortgage crisis.”

And that, of course, puts the banks at risk. “We’re on the edge, and if this thing doesn’t get resolved quickly, I’m worried,” Greenspan says.

Home price stability will come only after the “liquidation” rate of single-family homes peaks, he argues. “I don’t think we’re there yet.”

Still, Greenspan is impressed with progress at the macro level. “Things have unquestionably improved” in the economy and financial markets, he says.

“They’ve improved everywhere in the world. It’s remarkable.”

Alan Blinder, who served as vice Fed chairman under Greenspan, agrees.

In Congressional testimony, Blinder said that “if there are no more reversals, history will judge that by May 2009 we will have passed the worst of the crisis.”

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Former Federal Reserve Chairman Alan Greenspan says banks haven’t emerged from all their woes yet.While the economy is beginning to bounce back, U.S. financial institutions still need to raise a lot of capital, he told Bloomberg News.“There is still a very large unfunded...
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