JUNE 2008 BEACON
U.S. Facing Two-Year "Credit Recession"
Fallout from subprime mortgage crash to have lingering effect
<Reuters><June 4, 2008>In a report from Reuters today, a leading Wall Street analyst said the U.S. will endure a “credit recession” resulting from the sliding housing market and overly exuberant subprime mortgage lending practices. This credit recession is projected to last at least two years and will probably cause a “massive consolidation” in the financial services sector.
Lehman Brothers Holdings Inc’s chief global fixed-income strategist Jack Malvey said that at the end of this period, a healthier market will emerge…but not until after the country endures a prolonged period of purging.
“We’re going through a tough spell with regard to credit,” Malvey said at a recent securities industry conference. The “subprime debacle” will be followed by years of tight credit, Malvey said.
Richard Bernstein, chief investment strategist at Merrill Lynch & Co. Inc. said that in the last economic downturn, about 25% of the financial industry “went away.” So far, only 7 percent of financial firms have failed or been acquired in the current crisis.
Both Lehman and Merrill have suffered from the credit market crisis.
[Photo: Reuters]