Goldman Sees $2T Credit Shortfall, Major Slowdown

Nobel winner, investment firm warn of growing risk
By Jim O'Neill,  Newser Staff
Posted Nov 16, 2007 10:44 AM CST
Goldman Sees $2T Credit Shortfall, Major Slowdown
Nobel Prize-winning economist from Columbia University, Joseph Stiglitz.   (Getty Images)

The subprime mortgage crisis that has cost financial companies $400 billion and triggered what one banker is calling the worst housing market since the Great Depression will force a $2 trillion credit squeeze that could set off a “substantial recession” in the US, reports Bloomberg. Goldman Sachs said the economy could grow a sluggish 1.9% in 2008.

Nobel-prize winning economist Joseph Stiglitz, meanwhile, says ex-Fed Chairman Alan Greenspan, who stepped down in 2006, “really made a mess of all this.” Greenspan’s advocacy of variable-rate mortgages set off a “consumption binge” fueled by easy access to credit. He also faulted President Bush’s 2001 tax cut, calling the administration’s fiscal policy an example of “macro economic mismanagement.” (Read more credit stories.)

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