The world of finance is rarely a happy-go-lucky place (unless you’re making money hand over fist), but the news coming out of the sector this past week has been downright gloomy.
Pundits, politicians, and professionals may not agree whether the US is in a recession or not, and while I’m no economist, here’s what’s been coming across the news wires.
Inflation reached a 17-year high in July. Home sales reached a ten-year low and home prices fell 7.6% in the second quarter compared to the same period last year. Foreclosure filings rose 55% in July. Bank seizures of properties in default have nearly tripled. Unemployment rates are up.
Things can’t get much worse, right? Apparently they can. Former Fed chairman Alan Greenspan, who said earlier that more bank failures are imminent, predicted that the housing markets will bottom out in 2009. Lenders Fannie Mae and Freddie Mac, mandated by federal charter to provide mortgage funding and to keep housing markets liquid, have been rumored to be teetering on the brink of collapse for months now. The pressing question is whether they will require a bailout from the US government. Oh, and those rising food and energy costs shouldered by consumers are causing credit card balances to balloon even more. Eventually all that household debt has to catch up to someone, sometime, no? (Bank of America and Capital One, I’m looking in your direction.)
The news is not all bad, though. Proving that every silver lining has a cloud, Merrill Lynch has lost so much money due to the mortgage crisis ($29 billion and counting) that they may not have to pay taxes in the UK for the next sixty years.
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