When President Eisenhower had an ileitis attack in 1956, the market dropped by 25 percent in one day, notes former Bear Stearns chair Ace Greenberg.
The panic was short-lived: Stocks went back up again.
Thirty-one years later, there was another Wall Street panic.
“In 1987, we saw blue chips go down 30 percent in two days. That created a panic, too, but it didn’t affect other sectors like banking or homes,” Greenberg told Steve Forbes in an interview.
Now, we're witnessing yet another crisis.
Both those panics are far different from the financial crisis that’s happening now, Greenberg notes. “There’s never been anything this pervasive, this challenging to the structure,” he says.
Greenberg says the huge number of securitized mortgages distinguishes the current financial crisis from its predecessors. Mortgage-backed securities created a credit problem that spread nationwide before infecting Europe and Asia.
“We didn’t play favorites. We sold to everyone,” Greenberg says.
Deciding how to evaluate and price these securities now poses a very big problem, but one Greenberg believes will eventually work itself out.
“One day, people will decide that houses are cheap, and anyone who’s been on the verge of buying one will start buying, and this whole thing could reverse itself very quickly,” Greenberg says.
“I don’t know when that will happen, but it will.”
Julia Gordon, policy counsel at the Center for Responsible Lending, likens the present financial crisis to being hit by a hurricane.
"Except this was not an act of God. This was an act of man,” Gordon told the Poughkeepsie Journal.
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