'WARNING SIGNS
U.S. economy teeters on the brink
Bush, Bernanke endorse $100-billion package in effort to prevent recession as housing mess hammers banks, consumers and investors
BARRIE MCKENNA
U.S. economy teeters on the brink
Bush, Bernanke endorse $100-billion package in effort to prevent recession as housing mess hammers banks, consumers and investors
BARRIE MCKENNA
WASHINGTON -- In a bid to save the world's largest economy from recession, U.S. President George W. Bush and central bank chief Ben Bernanke yesterday endorsed a $100-billion stimulus package as the spreading housing mess continued to hammer banks, consumers and investors.
The rare plug for fiscal action comes as a growing number of economists say the United States is either in recession or perilously close to it. "The United States has now effectively entered into a serious and painful recession," said economist Nouriel Roubini of New York University.
Prof. Roubini said all of the keys to economic health are headed in the wrong direction, including the housing market, credit availability, the job market and business spending. Add to that a run-up in oil and gas prices, and the consumer is likely to take it on the chin in 2008, he said.
Another major Wall Street investment bank acknowledged yesterday that it vastly underestimated the cost of its misadventures in the subprime mortgage market. Merrill Lynch & Co. - the world's largest stockbroker and one of the major backers of mortgage bonds - reported the worst quarter in its history, losing $9.8-billion (U.S.) in the final three months of last year and wiping more than $16-billion worth of bad loans off its books. That raises Merrill's housing-related losses to nearly $24-billion in 2007.
And the U.S. housing slump apparently isn't over. Builders broke ground on new homes at an annual rate of a million homes in December - the lowest level since 1991 and a 14.2-per-cent drop from November, according to U.S. data released yesterday.
Since the start of the year, a sense of gloom has taken hold on Wall Street amid worries that the housing slump is infecting the broader economy. In the past couple of weeks alone, stocks have quickly shed virtually all of last year's gains. Spooked by the hefty Merrill Lynch loss, investors sent the blue-chip Dow Jones industrial average down 306.95, or 2.46 per cent, to finish the day at 12,159.21.'
The rare plug for fiscal action comes as a growing number of economists say the United States is either in recession or perilously close to it. "The United States has now effectively entered into a serious and painful recession," said economist Nouriel Roubini of New York University.
Prof. Roubini said all of the keys to economic health are headed in the wrong direction, including the housing market, credit availability, the job market and business spending. Add to that a run-up in oil and gas prices, and the consumer is likely to take it on the chin in 2008, he said.
Another major Wall Street investment bank acknowledged yesterday that it vastly underestimated the cost of its misadventures in the subprime mortgage market. Merrill Lynch & Co. - the world's largest stockbroker and one of the major backers of mortgage bonds - reported the worst quarter in its history, losing $9.8-billion (U.S.) in the final three months of last year and wiping more than $16-billion worth of bad loans off its books. That raises Merrill's housing-related losses to nearly $24-billion in 2007.
And the U.S. housing slump apparently isn't over. Builders broke ground on new homes at an annual rate of a million homes in December - the lowest level since 1991 and a 14.2-per-cent drop from November, according to U.S. data released yesterday.
Since the start of the year, a sense of gloom has taken hold on Wall Street amid worries that the housing slump is infecting the broader economy. In the past couple of weeks alone, stocks have quickly shed virtually all of last year's gains. Spooked by the hefty Merrill Lynch loss, investors sent the blue-chip Dow Jones industrial average down 306.95, or 2.46 per cent, to finish the day at 12,159.21.'
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