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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (192296)	3/21/2009 9:05:38 AM
From: stockman_scott	Read Replies (4) \| Respond to of 306849

Greenspan Says Banks Need $750 Billion More In Capital (Update1) By Steve Matthews and Bill Faries March 20 (Bloomberg) -- Banks will need more than $750 billion in fresh capital from either the government or private investors to ensure their soundness and return to normal levels of lending, former Federal Reserve Chairman Alan Greenspan said. “Restoration of normal bank lending will require a very large capital infusion from private or public sources,” Greenspan said at a conference in Acapulco, Mexico. The need is “north of $750 billion” and can’t be met just from banks’ cash flows, he said. Estimates of banks’ capital needs vary widely, with New York University professor Nouriel Roubini predicting in February that banks will need “a trillion-and-a-half” dollars. The U.S. government is now conducting “stress tests” of the largest banks to determine capital needs in the event of worse-than-expected economic conditions. Some banks, such as Northern Trust Corp., have said they didn’t need any help and plan to repay the government’s funds. U.S. Treasury Secretary Timothy Geithner said he will soon announce details of his plan to help banks clean up the non- performing assets that are clogging the financial system. Financial institutions have more than $1.2 trillion in credit losses and writedowns worldwide since the crisis began. Many of those losses stemmed from mortgage-related investments that declined with the collapse in the housing market. Stocks ‘Cheap’ Stock market values are now “cheap,” Greenspan said, though they may well decline further. The former central banker’s comments on equities haven’t always been timely. In 1996, Greenspan said the stock market may reflect “irrational exuberance” when the Dow Jones Industrial Average was above 6400. The index peaked at over 11,700 in January 2000, before technology stocks slumped. “By any historic measure, world stock prices are cheap, even after the recent run-up,” he said. “But history counsels that they could get a lot cheaper before the decisive turn.” Stocks slid the most in two weeks today as analysts cut earnings estimates for General Electric Co. and Congress moved toward raising taxes on bank employees’ bonuses. The Standard & Poor’s 500 index fell 2 percent to close at 768.54. The former chairman, who largely opposed increased regulation, said policy makers would be making a mistake to change rules for banks in the middle of the crisis. “We need not rush to reform,” he said. “Private markets are currently imposing far greater restraint than any” recent proposals made to tighten regulations. Greenspan also said it’s difficult for central bankers to anticipate speculative asset bubbles in “real time.” “Anticipating the onset of crisis appears out of our forecasting reach,” he said. Greenspan left the Fed in January 2006 after almost two decades at the helm. He has returned to his role as a private sector economic forecaster, speaking at conferences and consulting for clients such as Deutsche Bank AG. To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Bill Faries in Mexico City at wfaries@bloomberg.net Last Updated: March 20, 2009 16:25 EDT