Lockhart at Subprime Panel - Is subprime contagious?
Fed watchers are probably asking, “Why the Panel discussion?”
Lockhart’s observations include;
* Resolution of subprime crisis requires some stabilization of U.S. housing markets
* current state of financial markets - “evolving positively but still fragile - unusually vulnerable to shocks”
* “decline in value of housing starting to create concern about other consumer loan and mortgage markets including credit cards, auto loans, student loans and prime mortgages.
* major investors in Asset Backed Commercial Paper have exited the market - perhaps never to return
* “Generally favorable economic conditions should help improve financial market stability”
* Recent FED rate cuts should “encourage stronger economic growth in the second half of 2008″
* Subprime crisis “raised questions about the fundamental institutional, incentive and practices framework of several moder markets”.