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Financial expert: Nation ‘healing’

• An Albany financial expert discusses the causes of the economic crunch Americans are facing.

Joshua Brown

ALBANY — The hardships hitting many Americans in their pocketbooks may be nearing an end, an Albany financial expert says.

The Jenkins Group co-owner Tony Bueschen said during a brief address to the Albany Rotary Club that he expected the nation’s financial crisis to be nearing an end.

“We’re beginning the healing and recovery,” he said. “I feel like we’ve made it through the tough times and the better times are ahead.”

Bueschen explained to the group how the financial crisis that is challenging the way many Americans live began. Three “bubbles,” he said, popped at once, combining to put a pinch on America’s pocketbooks.

The bubbles, he said, were property values, mortgages, and investment banks.

Because home prices kept going up, it became difficult to get first-time homebuyers in the market, which allows “new money” to come into the real estate market and helps homeowners buy nicer homes as their income increases.

“You have to have new money, or fresh money,” he said, “coming into the game, so (other homeowners) can move on up.”

Also because of ever- increasing home prices, homeowners would often refinance their homes, which led him to talk about the collapse of the second bubble.

When a homebuyer takes a mortgage, a typical bank provides the mortgage and charges a fee, but then sells the mortgage to another bank, in effect handing off the loan and taking in a fee, he said.

The investment banks that took the loans — the third bubble — would issue “commercial papers,” or what is essentially short-term unsecured debt, to “leverage” themselves. When the financial crisis hit in full, those banks were stuck with high debts.

“So when the bottom fell out, they had a lot of debt and not enough capital,” Bueschen said.

As a result of the crunch that hit the investment banks, Bueschen said the Federal Reserve will likely begin regulating the industry more heavily.

Bueschen also said if oil prices continue to decline — they have set record declines in the last week, making a four-day, $16 decline by Friday — the stock market could rebound by the end of the year.

“If we can get oil prices to come down, stock markets should do well after the election,” he said.

During a quick question- and-answer session, Bueschen said he anticipated the Federal Reserve would increase interest rates again in 2009 as the economy begins to rebound.

“I would expect in January to see them to rise again,” he said about the rates.

Bueschen was also asked if he thought bank stocks had hit the bottom yet, to which he responded “I thought they were (at the bottom) six months ago,” evoking laughter from the Rotarians.

He then went on to say that he thought they would not continue to decrease.

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