Former Federal Reserve Chairman Alan Greenspan says the U.S. economy is “clearly on the edge” of a recession. The statement came in an after-dinner question-and-answer session with energy industry executives at the Cambridge Energy Research Associates conference in Houston last night. Greenspan says odds are 50 percent or better that the nation is headed toward a recession. He cited the depressed housing market as a primary culprit. Greenspan’s prediction came several hours after his Federal Reserve successor, Ben Bernanke, told Congress the economy is deteriorating but he still looks for slow growth as 2008 transpires. Greenspan said the reason the recent credit crunch–triggered by the subprime lending debacle–hasn’t hit U.S. businesses particularly hard is because they’ve been operating in a time of high cash flows. He says that’s minimized their need for such credit options. When asked when the housing crisis might bottom out, Greenspan responded that the country still has “a long way to go.”
Federal Reserve Chairman Ben Bernanke is indicating that further interest rate cuts are on the way. He told the Senate Banking Committee that the economic outlook has worsened in recent months, while risks have increased. Bernanke pledged that the Fed “will act in a timely manner as needed to support growth.” The way it does that is to reduce short-term interest rates. He was joined at the hearing by Treasury Secretary Henry Paulson. Both men agree that the economy can avoid a recession. The pair said that the administration and the Fed are expected to downgrade their economic forecasts for this year. Bernanke said a new Fed forecast due next week will indicate an outlook for weak growth, “but still positive.”
The weekly AAA Texas survey finds retail gasoline price trends mixed this week across the state. The survey finds regular self-serve prices at Texas pumps averaged $2.87 per gallon, little changed from last week. Nationally, the average was $2.98 per gallon, also little changed from last week. Houston’s averages dropped by under a penny to stay at $2.85 per gallon. Auto club spokeswoman Rose Rougeau notes that six of the 11 Texas cities in the survey posted price increases while the other showed declines. She says that oil and gas inventories remain up, so it’s “too early to tell which direction retail gas prices will head.” Corpus Christi has the lowest average gas price in Texas at $2.78 per gallon, down three cents from last week. Amarillo has the most expensive gas at $2.92 per gallon, up four cents from last week.
The fire from Friday’s south Texas oil pipeline explosion has nearly burned itself out. Hidalgo County Emergency Manager Tony Pena says earlier reports of one injury in the explosion near McCook–were incorrect. Pena says the pipeline is owned by Hesco. He says Farm-to-Market Road 490 west of McCook has been damaged by the fire and is closed. The cause of the fiery accident is sought. Wind gusts of up to 40 miles an hour fanned the orange flames, which reached several hundred feet into the air. Firefighters shut flow of crude oil distillate about ten miles down the pipeline and were waiting for the rest of the crude to burn off.
Some lawmakers say government may have to help the bond industry, or risk further damage to the U.S. economy. Problems in the bond insurance industry are spreading beyond Wall Street, threatening the cost of financing everything from student loans to public works projects. Lawmakers and regulators are concerned that a collapse of the bond insurers–which back the funding for building hospitals, schools and more–could inflict further pain on banks suffering from the mortgage meltdown and lead to higher taxes for homeowners. Head of the House Financial Services Subcommittee on Capital Markets, Pennsylvania Congressman Paul Kanjorski, said one solution may be create a new federal insurance corporation for bonds, modeled on the FDIC. New York Governor Eliot Spitzer said more immediate action was needed. New York regulators are working with bond insurers and banks on a plan to inject billions of dollars into the insurers. They include MBIA, Ambac and Financial Guaranty Insurance.