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July 9, 2008 11:23:28 AM CDT

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Recession Risk Seen in Mortgage Misery

Posted Sep 2, 07 1:23 PM CDT in Business,  US    Editor's Choice

(Newser) – Mortgage woes could spark a serious recession, a prominent economist said yesterday. National Bureau of Economic Research President Martin Feldstein said that interest rates must be slashed heavily and quickly, or declining prices and weakening home equity withdrawal could hobble the economy, Reuters reports.

Feldstein, who was on the short list to head the Fed, did cite the moral hazard of bailing out the speculators who created the crisis, but said a cut as significant as 100 basis points might be necessary nonetheless. For his part, the Fed chairman maintains he won’t let innocent people suffer from an expanded crisis, and will act if the evidence demands it.

Source Reuters

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White House Holds 2-Day Conference On The Economy   (Getty Images)
Martin Feldstein, president of the National Bureau of Economic Research and a Harvard University economics professor, has been mentioned as a possible successor to Federal Reserve Chairman Alan Greens   (KRT Photos)
Eileen Griffin is trying to sell her house in Cheshire, Conn. Friday, Aug. 24, 2007. Like many, because of turmoil in the mortgage market, Griffin is having trouble finding a buyer. (AP Photo/Douglas...   (Associated Press)
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US economy  • subprime mortgages  • Federal Reserve  • recession  • Ben Bernanke  • mortgage  • interest rate  • home equity  • Martin Feldstein


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