Bubble Trouble for the Fed - Morning Business Memo
Top officials at the Federal Reserve had no idea in 2006 that the housing bubble was about to burst. "I think we are unlikely to see growth being derailed by the housing market," said Chairman Ben Bernanke at the time. His comments were contained in hundreds of pages of newly released transcripts of closed-door Fed meetings. Treasury Secretary Timothy Geithner, who was a Fed official, expressed confidence in September 2006 that "collateral damage" from housing could be avoided. Months before the housing bubble burst, igniting the worst financial crisis since the Great Depression, Bernanke and others spoke mostly of a soft landing for the economy. The views echoed the widely held beliefs of most economists and money managers at the time who were confident about growth and stock valuations.
Apple becomes a victim of its own success in China. The well-hyped launch of the iPhone 4S was canceled today at Apple's flagship store in Beijing. The company says it acted to protect the safety of customers and employees. Scalpers hired to buy as many phones as possible were in the long overnight line. Some threw eggs and shouted at Apple employees when the store didn't open.
Italy's borrowing costs dropped for a second day in a row. The latest bond auction indicates improving investor confidence in Italy's financial future. Interest rates on three year bonds dropped to 4.83 percent - down from a peak of 7.89 percent in November. Italy's huge borrowing needs have made it a focal point of the European debt crisis. Fitch Ratings Agency, which has said it will consider whether to downgrade Italy's credit rating by the end of the month, estimates the country needs to borrow $458 billion this year.
The Greek government will hold a second day of talks today with representatives of private bondholders on a crucial debt-relief deal. Without it, Greece could suffer a catastrophic bankruptcy that would send shockwaves through the global economy.
Potential buyers are considering bids for American Airlines. Its parent company, AMR Corp., filed for Chapter 11 bankruptcy. The Wall Street Journal says Delta Air Lines, US Airways Group and TPG Capital are separately studying bids.
Richard Davies Business Correspondent ABC NEWS Radio twitter.com/daviesabc
