The Credit Collapse of 2008

Martin D. Weiss, Ph. D. examines the credit collapse and what the Federal Reserve is attempting in order to avoid a full scale recession. In this issue of Money and Markets, Dr. Weiss takes a closer look at what The New York Times is reporting in reference to the recession.

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Jupiter, Fla. (PRWEB) March 12, 2008

Martin D. Weiss, Ph. D. examines the credit collapse and what the Federal Reserve is attempting in order to avoid a full scale recession. Dr. Weiss takes a closer look at what The New York Times is reporting in reference to the recession.

The credit collapse is not just an ordinary recession that repeats itself with each new business cycle of the 21st century. Nor is it the Great Depression returning from the depths of the 1930s. The credit collapse is a sudden surge in debt defaults by borrowers and an equally sudden disappearance of new loans by lenders. It's an unprecedented surge in home foreclosures and an equally unprecedented cutback in new home mortgages. It's causing unexpected corporate bankruptcies plus equally unexpected demands by banks to put up more collateral. It's threatening to sink businesses, paralyze local governments and gut the investment portfolios of millions of Americans. It's even starting to sabotage the best laid plans of government; neutralizing the Fed's interest rate cuts, pre-empting Congress' economic stimulus plan and threatening to strip Washington of its traditional powers to fight a recession.

The March 9 issue of The New York Times reported that the government's usual fiscal and monetary policy tools are failing. This failure is raising questions about what more the Fed can do and that its actions so far have done little to counter sinking housing prices, the falling stock market and disappearing jobs.

"The Fed's main weapons against a downturn," says The Times, "are ill-suited to a crisis that stems from collapsing confidence about credit quality."

Just since the start of 2008, the Credit Collapse of 2008 has driven a dagger into the markets for prime home mortgages, commercial mortgages, business loans, student loans, credit cards and municipal bonds. And in early March, the credit collapse struck bonds issued by Fannie Mae and Freddie Mac. Although not backed by the full faith and credit of the U.S. government, these bonds were thought to be immune from the crisis because of their special status as government "sponsored" agencies. But they weren't.

The New York Times puts it this way: "If investors lose confidence in Fannie Mae and Freddie Mac, which have become the only major remaining source of mortgage financing in recent months, Fed officials fear that homes sales and housing prices could plunge further and foreclosures could climb even higher than they already have."

In a desperate attempt to avert a full-scale collapse of credit markets, the Federal Reserve declared it would offer:

  •     An unprecedented $100 billion in long-term loans, accepting virtually any kind of debt instruments as collateral including bad paper that's at the core of the credit collapse.
  •     An equally unprecedented $100 billion in short-term loans, accepting Fannie Mae and Freddie Mac bonds as collateral.
  •     Plus, as much additional funding as needed to ease the pain for the next victims of the credit collapse.

"That's a heck of a lot of new paper money flooding into the banking system, especially considering that it stems from economic weakness, not strength and that it comes in the form of devalued paper, not wealth," Dr. Weiss states.

To read this issue online, please visit:

Martin D. Weiss, Ph.D., founder and president of Weiss Research, Inc. and a leading advocate for investor safety, is a nationally recognized expert on domestic and international financial markets. With more than 35 years of experience, including many years in Latin America and Asia, Dr. Weiss has helped empower millions of investors to make better financial decisions through his monthly Safe Money Report and daily Money and Markets.

Dr. Weiss' keen understanding of foreign markets and the global economy has earned him a reputation for thoughtful, in-depth analysis that investors can rely upon to make informed financial decisions. Regularly called upon by the media for his independent investing guidance, he has been featured in publications nationwide, including The Wall Street Journal, The New York Times, Chicago Tribune, Investor's Business Daily, and Forbes and has also appeared on CNN and CNBC.

Throughout his career, Dr. Weiss has been an advocate for consumers and investors in the insurance, banking and brokerage industries, dedicating his time and resources providing analysis and data for Congressional testimony, constructive proposals for reforms in the securities industry and legislation for full financial disclosure as well sound accounting and fiscal policy. In November 2004, he launched the Sound Dollar Committee, a nonprofit organization dedicated to building a network of investors seeking to protect the nation's future by demanding honesty in government accounting, a balanced budget and sound economic policy.

Dr. Weiss is author of The New York Times best-seller, The Ultimate Safe Money Guide, which gave baby boomers a road map to grow their wealth safely. It was listed on the New York Times Business, Wall Street Journal, and BusinessWeek best-seller lists, as well as the Barron's Roundup for 2002.

Dr. Weiss holds a bachelor's degree from New York University, a Ph.D. from Columbia University and is fluent in eight European and Asian languages.

Money and Markets ( is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit