Former Fed Chief Alan Greenspanis usually a bit more sanguine on things, having recently pronounces his bullishness on stocks. So we wonder what his angle is with this.
According to Bloomberg, he’s now warning of large shortfalls remaining on bank balance sheets:
Former Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.
“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 said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”
Greenspan’s comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests on the 19 biggest U.S. lenders.
It’s not totally clear what he means, or how much “large” is. And, frankly, it’s not clear how much credibility he really has, since a lot of his comments can either be attributed to either legacy-burnishing or book-talking for his clients. If you don’t think he had the proper handle on things when he was Fed Chief (and many don’t) there’s no particularly good reason to take what he says seriously now.
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