Cue the happy twittering birds and the singing, smiling Mr. Sunshine- We’ve got Bank of America’s CEO Kenneth Lewis and none other than the Treasury Secretary himself, Henry Paulson, assuring us that after a long hard road, the housing slump is nearly over:
From Bloomberg today: [Hat tip Tanta!]
The worst U.S. housing slump in 16 years will begin to ease in the next month or two, and job growth will lift home prices and spur construction early next year, Bank of America Corp. Chief Executive Officer Kenneth Lewis said.
“The drag stops in the next few months,” Lewis said in an interview yesterday in New York. “It’s just about to be over. We’re seeing the worst of it.”
If that reassurance doesn’t fill you with the desire to run out and get a couple of wonky loans to do some house flipping, maybe this will: [Hat tip C.K.!]
WASHINGTON – The major slump in the housing market is nearing an end and should not have a significant impact on the overall economy, Treasury Secretary Henry Paulson said Wednesday.
"We have had a major housing correction in this country," Paulson said in an interview with a small group of reporters at the Treasury Department. "I do believe we are at or near the bottom."
Paulson said he realized there would be losses along the way but said he believed those losses have been "largely contained."
"It doesn’t pose a risk to the economy overall," he said.
My opinion on Lewis’ and Paulson’s opinions? I’m going to let Chris Rea say it- here’s his 1978 song Fool if you think it’s over:
Hello from Germany,
when i read commets like this i also need a break….
here is more from Lewis
Bank of America Corp. Chief Executive Officer Kenneth Lewis said private-equity firms will enjoy “unprecedented” access to financing for at least a few more years before a deal “goes bad.”
Lewis, who last month called for “sanity” in the corporate-loan market, said the shakeout may not occur until the next decade. Leveraged-buyout funds have raised more than $250 billion for acquisitions since the start of 2006 and announced more than $1 trillion of takeovers. Barring some kind of shock to the markets, the easy money probably will continue, said Lewis, who runs the second-biggest U.S. bank.
and this guy runs the largest us bank…..
If yesterday wasn’t the storm itself, it certainly featured a bolt of lightning illuminating the armies of Orcs advancing on the castle. From the story you’re quoting — here are some more barely believable quotes from further down.
“Bank of America’s Lewis Expects Easy Financing for LBOs to Last”, by Will Edwards, Bloomberg, June 20, 2007.
Thanks John
forgotten the link….
Oops, Henry and Kenneth know when to try and stop the water from sinking the boat:
“Bond Risk Rises on Concern Over Bear Stearns Hedge-Fund Losses”
http://www.bloomberg.com/apps/news?pid=20601087&sid=azSulI_FQDkk&refer=home
““While markets ignored the subprime-mania time bomb since the market shake out in March, it seems to be a longer lasting phenomenon,” said Jochen Felsenheimer, head of credit derivatives strategy at UniCredit Group in Munich. “In this highly leveraged environment, when the playing field is dominated with hedge funds, the risk is you could get a domino effect. There’s the potential for more negative news.””
I for one hate that song. How about “Running on Empty,” another 1978 tune?
Hank is a cheerleading pimp, that’s for sure. Wonder how many questions those reporters at Treasury asked…
Fool indeed… you can’t make this stuff up… hahaha
BTW – I was born in 1978… must have been a great year!!!!
P.S. Word is oil futures are up today on the amount of midnight oil burned by the Plunge Protection Team trying to find a way to keep all the subprime tranches from taking a 30% pricing haircut…
It was a lousy Jimmy Carter inflation-packed year. I was in high school, and my introduction to business and finance was the dubbing of Treasury notes as “Articles of Confiscation.” Plus ca change, plus c’est la meme chose. Springsteen put out “Darkness on The Edge of Town” though, and my baseball team had a good summer, so it wasn’t awful…just lousy.
When I read comments like Paulson’s (or previously, Lereah’s), I get the impression that one day they will look back on their terribly incorrect statements and defend their perpetual cheerleading with something like, “Well, I couldn’t very well yell fire in a burning building, could I? It would have caused a stampede to the exits, and thus a catastrophe for the economy!”
Well, it is one thing not to want to yell “Fire!” on the burning-down housing market (ie: “Quick! Sell everything and run for your financial lives!”)
However, it is quite another thing, while the housing market is burning down, to tell everybody, “Please settle down comfily into your seats because we’ve got a doozy of a double feature playing tonight. Oh, and don’t you mind the flames, heat, and embers; the fire department has promised us that will be taken care of shortly.”
Do these guys draw straws for who gets to throw their reputation on the “we’ve hit bottom!” sword next?
Looks like Mr. Lewis got the short straw this month.
“We have hit bottom?” and this is based on what exactly?
Did housing inventory drop off and I didn’t hear about it? Did sales spike this month and no one told me? Did CDO bonds start trading at new all time highs? Did construction starts get revised 10 times higher then last month? Are lending standards being lightened up?
That is a big fat “NO” on all fronts. Until we can get some “YES” on those answers we have not hit bottom.
Agnostic- [comment #5]
Granted it’s not one of the great songs of our time- but I thought the title was perfect.
Rogersmith-
You hit the nail on the head. Without any kind of upswing, or at least some moderation of trends, you are left saying, Of course it’s a bottom, because how much worse can it get?
Hardly the stunning logic that will lay all dissent to rest.
“We have hit bottom?” and this is based on what exactly?
Based on slight upticks in one or more economic indicators.
Students of the last downturn, ‘89-’96, who go back and look at the indicators for those 8 years will notice 3 slight upticks – each one progressively smaller – at 12, 24 and 36 mos. … followed by further declines for the year.
This downturn has just begun. The occasional uptick is to be expected.
Once ‘07 is over and we step back, it will be clear that the “bottoms” we kept hitting were really just stairs on the way back down to normal, stable, sustainable levels of affordability.
We’ve got quite a few more years of this trip back down to the ground floor, where suicide loans are no longer necessary.