You know things are bad when one of the most respected economists in the world admits he has been shocked by the breakdown in the global credit system.
You know things are bad when one of the most respected economists in the world admits he has been shocked by the breakdown in the global credit system.
Last night, former Federal Reserve chairman Alan Greenspan addressed the US Government’s House of Representatives Committee on Oversight and Government Reform, and admitted that “this crisis, however, has turned out to be much broader than anything I could have imagined”.
“Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity – myself especially – are in a state of shocked disbelief.”
Greenspan also admitted that he and other regulators had been “partially wrong” not to impose tighter restrictions on the trading of financial instruments such as credit default swaps.
The admissions from the once-worshiped Greenspan are cold comfort to the millions of investors around the globe who have taken a hammering as a result of the crisis, but it is positive to see US legislators are already trying to work out ways to stop this mess from happening again.
Despite a positive night on Wall Street last night – the Dow Jones Industrial Average rose around 2.5% as energy companies got a boost from the rising oil price – trade on the Australian market has been subdued.
The benchmark S&P/ASX200 index fell 1.5% or 57.9 points to be at 3916.5 at 12:05pm AEST.
As has been the pattern over the last few months, nervous investors have dumped mining and banking stocks again this morning.
In corporate news, energy giant AGL has gone into a trading halt pending a “material transaction”, which means either it is taking someone over or about to be taken over itself.
Building materials company Boral has also warned its profit will fall because of weaker conditions in the US and Australian housing markets.
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