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Wednesday, November 7, 2007

Falling Home Prices Pose Major Risk: Greenspan

November 6 2007

Former Federal Reserve Chairman Alan Greenspan said on Tuesday that there is a need to accelerate the rate of inventory liquidation, and that will mean bringing housing starts down and sales up. The drag from the housing market's downturn and the surge in defaults among subprime mortgage borrowers has hit credit markets around the world and prompted the Federal Reserve to slash interest rates to limit the economic fallout. Greenspan said about $900 billion of subprime mortgages have been securitised into fixed-income instruments, and the excess level of unsold homes is driving the price declines that are eroding the value of the securities backed by those mortgages.

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