 US economy 'in worst shape since World War II'
(China Daily)
Updated: 2008-07-02 07:47 Billionaire investor Eli Broad said the US economy is in the "worst period" of his adult life as a housing market recovery remains "several years" away. "This is worse than any recession we've had since World War II," Broad, 75, said in an interview. Broad, the founder of homebuilder KB Home, said the US should avoid a depression on the scale of the 1930s because the country now has sufficient "safety nets". The economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. That caps the weakest six months of growth in five years. The US lost 49,000 jobs in May, when the unemployment rate rose to 5.5 percent, the fifth straight month with a drop in payrolls and the biggest jump in the jobless rate in more than two decades.
"This is the worst period of my adult lifetime," Broad said, speaking about the US economy. "I do not think things are going to get any better" before the next president takes office in January. The banking industry may need additional capital to protect against bad loans, Broad said. US banks may have to raise $65 billion as losses and writedowns extend into the first quarter of 2009, Goldman Sachs Group Inc analysts said last month. The world's biggest financial firms have posted about $400 billion in writedowns and credit losses tied to the US housing slump, according to data compiled by Bloomberg. Broad, whose main focus is his $2.63 billion philanthropic organization, last month joined investors in pushing for the ouster of Martin Sullivan as chief executive officer of American International Group Inc, after the world's largest insurer posted record losses. AIG, where Broad served as a director from 1999 until 2003, lost half its market value in the past year and has posted $13 billion in losses tied to the subprime mortgage market collapse over two quarters. "It will turn around in due time," Broad said of New York-based AIG. "It's not going to be overnight." US borrowers will continue to default on home, auto and credit-card loans, he said. More than 100 mortgage companies have suspended operations, closed or sold themselves since the start of 2007. American Express Co CEO Kenneth Chenault said last week that credit indicators including late payments have worsened beyond the company's expectations. The US government stimulus checks helped support economic growth and more federal help is needed to fuel growth, he said. Repairing the damage to the US economy will require political leadership on US energy, healthcare and education policies, Broad said. Those areas are the focus of his foundation. "I worry about the future of America," said Broad. "It's time to regroup and redefine our place as a country and that's tough to do." Agencies (China Daily 07/02/2008 page16) |
