Both Larry Summers, former Treasury Secretary, and Ron Insana, Financial Manager, appeared on CNBC today. Maria Bartiromo interviewed each of these gentlemen regarding the state of the United States Economy and the Sub-prime mortgage crisis. Larry Summers took a different tact from Leo Mozilo's, CEO of Countrywide Mortgage, explanation of the remedy to the housing and sub-prime mortgage crisis. Mozilo said that essentially the law of supply and demand needed to take hold (houses on the market vs demand) to alleviate the downtourn in realestate prices. Larry Summers was diplomatic but clearly differed from Mr. Mozilo's comments. Ron Insana commented to Maria Bartiromo that the "worst was yet to come" in the sub-prime mortgage crisis. Ron Insana is well respected on Wall Street for his acumen in the workings of the Financial Markets. Larry Summers followed Robert Rubin in the position of Treasury Secretary under President Bill Clinton. Both Rubin & Summers are respected for their knowledge and ability. The consenus was that the fallout from the sub-prime issues has not as yet been seen in total dollar impact in the Financial Markets (Banking). Earlier today the European head of Citicorp made the point that Citicorp had "lost more money than they had made" from their sub-prime mortgage portfolio. If this is credible, and I have every reason to believe this statement, Citicorp has not even come close to disclosing just what the final impact will be on the financial statement for Citicorp. Given these disclosures and cogent comments from well respected capitalists, the condition of the United States Economy is more fragile than has been advertised by the Bush Economic Team, Treaury Secretary Henry Paulson, or by the President. Recession is inevitable. The only unknown is how deep a Recession will take place in 2008. More evidence is the fact that automakers are scaling back their plans for building vehicles next year. That plan alone will slow Economic growth. Bold and Decisive leadership is required on all fronts. Can Bernanke and the Federal Reserve remain poised to take the corrective action necessary to avoid long term economic stagnation? Comments, opinions................
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