From the Oregonian (http://www.oregonlive.com/opinion/index.ssf/2008/09/the_economy_now_what.html)
"The root cause of Wall Street's crisis was excessive leverage used by investment banks, financial insurers and intermediaries, hedge funds and, yes, homebuyers."
"It [the crisis] dramatcially impairs the ability to get money back into the economy for businesses to grow and for jobs to be created. It impedes recovery in the housing market because mortgages are difficult to obtain and home values continue to decline. and the loss of confidence in the financial sector in general has caused the stock market to plummet"
"Congress must act now to ge the nation on the road to recovery. It must provide financial relief to the middle class and to the neediest among us. These regulations must include increased transparency so investors like the State of Oregon can understand the underlying risks we are taking and price it accordingly. Until then, any recovery is a long way off. "
Randall Edwards, Oregon's State Treasurer
*****
"It [the economic crisis] is the perfect storm; a combination of the housing crisis, investment bank turmoil and economic downturn that together are creating an incredibly challenging environment that will fundamentally change the financial services industry."
"Keep some important points in mind: First, though the housing crisis has affected virtually every bank in America, only 2 perent of the country's 8,500 commercial banks are considered troubled; the vast majority are sound and well-regulated."
"Second, there are fundamental differences between commercial banks, which are funded through customer deposits, and investment banks, which are highly leveraged and funded with wholesale market borrowings. Investment banks don't have the liquidity needed to survive a downturn like this and are vulnerable to the kind of shake-up experienced last week with Merrill Lynch and Lehman Brothers."
"The investment banks also have been largely self-regulated for many years, something that is clearly going to change. Remember, the true pupose of regulation is to protect the consumer and the investor - not individual companies."
Ray Davis, President and CEO of Umpqua Holdings Corp
*****
"The 30-year push to eliminate (government) regulation must end. Markets require clear rules and mechanisms to enforce those rules. Without rules and enforcement, crises occur and people lose trust in markets. Without trust, markets fail and the economy suffers. Government must play a vital role in restoring trust. One of the presidential candidates clearly understands this."
Bryce Ward and Ed Whitelaw, ECONorthwest.
*****
"...we are experiencing our worst financial crisis since the Great Depression. What happened? Very simply, financial innovation got ahead of regulation. "
"The problems we are having did not arise in the traditional banking sector (but) come from what is called the shadow banking sector. This is comprised of firms such as hedge funds that do just what banks do - they take deposits, they use the funds to purchase financial assets such as housing loans and they only keep a fraction of those deposits on hand as cash reserves. But these firms are essentially unregulated and hence subject to the same problems that tranditional banks faced before the 1930's."
"Re-creating the Resolution Trust Company, as we did in the aftermath of the savings and loan crisis, would be a useful step to take to remove the bad financial paper that is poisoning financial markets.
Over the longer run, it is essential the regulation be modernized. The most important task is to bring the shadow banking sector out into the sunlight, and to put it under the same regulatory structure and safeguards faced by traditional banks."
Mark Thoma, associate professor of economics at the University of Oregon
*****
"Lehman, Merrill, Fannie and Freddie as we knew them are gone. The nearly three-year decline in housing activity, widespread home price declines and soaring delinquency rates have decimated institutions that financed the orgy and or held the toxic mortgages.
The last year has show us why the Federal Reserve was created in 1913 to keep the system functioning: by adding liquidity, and seeking to prevent a collapse of the US economy. The Fed is buying time for orderly processes to wind down..."
"People will think differently about housing: Some who bought or built on the expectation of continuous double-digit price gains will never do it again. Credit will be tighter..."
John Mitchell, principal of M&H Economic Consultants of Portland
*****
"What sets this rolling financial crisis apart most from others is the interconnection between disparate entities (banks, insurers, invstment banks, hedge funds, etc.) on a global basis.
In additiona to the obvious capital loss associated with the broad decline in stock prices, the "pain" is being broadly felt in the sense that access to credit has become more scarce and costly. Clearly, more jobs will be lost. Connecting the dots is fairly easy: Construction, anything related to real estate, finance, autos, all will continue to shrink."
"But the biggest change will involve a dramatic re-calibration of risk in the system. We are going through that right now, and that's good news. The bad news is that at the end of the day, there will be less credit in the system and it will be more expensive. It is a prescription for slow economic growth.
George W Hosfield, CFA is Ferguson Wellman's chief investment officer and a principal of the firm.
*****
"Many great banks have failed over the cneturies, and although their loss seems staggering at the time, the consequences are very fleeting.
"Easy money always triggers the beginning of a financial cycle. The Federal Reserve deserves some blame in this instance for making the party too wild."
"Whether a financial crisis turns into a severe receission or depression depends on how the crisis affects everyday businesses across the country."
"Today the Federal Reserve stands ready as the lender of last resort to help banks that are funamentally sound but temporarily unable to continue with business as usual. The Fed has extended that umbrella to shelter some nonbank financial institutions. The result is that families and businesses with good credit histories and adequate income are still able to borrow."
"The Federal Reserve's easy money helped get the cirsis going. Piling on were politicians trying to increase home ownership, even among buyers without the resources or habits to support a mortgage. Adding to the problem were community activists insisting that banks weaken credit standards for poor people. Removing these stimulus factors will pretty much solve the problem for the next couple of decades."
Bill Conerly, Economic Consultant and author
*****
My thoughts - As I've mentioned in a previous post, I don't like the comment that the push to get more citizens in homes is the problem. You can't tell me that any legislation mandated companies put their own future at risk by granting loans to people who can't pay them back. Institutional greed created that problem.
The last two commenters didn't seem quite right to me. Mostly a gut reaction to the tone of their comments.
Some of the comments make me a little hopeful about what kind of economy we have a chance to create from this mess. Definitely a pull back from the craziness. That doesn't have to be a bad thing if we all pull back together. If companies don't have to continue meeting unrealistic shareholder demands then a slow growth model can be stabilizing. We can return to fundamentals and build an economy based on real resources and production and innovation. I wonder if its possible that more manufacturing will come back to the US?
Maybe that's a Pollyanna hope. Its entirely possible that the politics will ruin everything. I hope the regular people and businesses won't panic. But, according to Paulsen, that's why we're doing this bailout - to keep everyone from panicking.
Also based on these comments, I don't think the true fallout has happened yet. The next couple weeks will be telling. Last week things happened so fast nobody had time for a real reaction.
Next week the congress will be talking about the Paulsen plan and we might have a wait and see attitude.
After that we might see people making decisions based on what's happened. That will be the real test. What happened to the stock market? Not so important to our daily lives yet. What our companies decide to do to weather the storm? Very important to our daily lives.
I guess we'll just have to wait and see...
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