In this issue

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review August 21, 2007 / 7 Elul 5767

A crisis of confidence

By Mort Zuckerman

Mort Zuckerman
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http://www.JewishWorldReview.com | Greed or fear, it is often said, propels financial markets. Today, it is fear. Compounding the fear is the eerie feeling that nobody really knows how bad things may be. The markets are seized by the sense that the air is going out of the global real-estate and financial bubble. Now the question to ask is who is going to suffer the consequences as the tide goes out and reveals who has been swimming without a bathing suit?

How could the public not be concerned when hedge funds run by two of the most sophisticated firms on Wall Street, Bear Stearns and Goldman Sachs, both renowned for their ability to quantify risk, ran into difficulties because their investments in highly rated structured bonds turned out to be worth less than thought? With the Goldman Sachs fund dropping more than 30 percent in a week, no wonder everybody began heading for the exit.

The virtual freeze in credit markets follows the extraordinary boom that financed a wave of corporate takeovers and created many first-time homeowners. No one knows the true value of all that residential real estate at the base of the pyramid in which mortgages back up the collateral debt obligations that in turn back up the short-term loans that many banks and hedge funds have made to finance these CDOs. A recent review of would-be homeowners is hardly encouraging. Almost all exaggerated their incomes to win approval, and almost 60 percent inflated their incomes by more than 50 percent. Too many home loans did not require any down payment, principal repayment, or documentation. In the state of Florida, home buyers last year devoted more than 30 percent of their median income to pay their mortgage, compared with 18 percent in 2003.

Guessing game. With home prices falling rather than rising, refinancing is impossible for borrowers who fall behind. Defaults have accelerated. As one pioneer in the bundling of mortgages into marketable securities put it, "We're not really sure what the guy's income is, and...we're not sure what the house is worth."

This is matched in the world of corporate finance, where "covenant-lite debt" that relieved the borrowers of much of their accountability for performance was barely 1 percent of corporate financing 18 months ago. Now it's one third.

Many pension funds, insurance companies, hedge funds, and banks hold swaps and subprime derivatives but have not yet reported their losses, or at least not all of their losses, making it difficult to understand how big their exposure is. They are having difficulties determining the value of assets, making them impossible to sell, i.e., illiquid. The danger is that a liquidity crisis will drive financial institutions into insolvency, which could have a major impact on the economy.

The central banks have seen the threat. The European Central Bank has put up $212 billion "to assure orderly conditions in the euro money market." It's an amount so staggering that it perversely led the markets to fear that the ECB knows something that would indicate the situation is worse than it seems. The Federal Reserve similarly stated that it would provide "reserves as necessary." The concern is that the market has such anxiety about all debts, up and down the food chain, that no one will wish to buy them.

Put it the other way: Fewer and fewer lenders are ready to lend. Many were going to sell high-yield bonds to finance their growth; they have had to withdraw them. In July, the issuance of these bonds dropped about 90 percent from June to a mere $2.4 billion. Even high-quality investment-grade bond offerings from companies with excellent credit fell from $109 billion in June to only $30 billion in July. This is bound to reduce economic activity and the jobs and incomes that go with it. The effect is similar to a run on the bank when depositors fear bank failure. The situation gives new meaning to the aphorism that nobody runs faster than a sophisticated banker who gets scared.

The Federal Reserve Board may not wish to create the moral hazard of solving problems for investors who made bad decisions. Investors have to pay for their mistakes — yet the Fed cannot allow the crunch to get so severe that it imperils the nation's entire credit system.

Not all panics necessarily lead to economic downturns. But in this mood of uncertainty, confidence in the markets can deteriorate to the point where it mirrors the old Wile E. Coyote cartoon in which he thinks he has been running on solid ground but then comes to see he has passed over the edge of a cliff.

The Fed's lowering at the discount window will help the financial markets, but what remains to be avoided is an economic downturn. John Maynard Keynes, the greatest macroeconomist of the past hundred years, once famously said, in effect, "In the long run we are all dead." Wrong. In the long run, we will all survive and flourish; in the short run, we can be dead. That is what the central banks of America and Europe must prevent.

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JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.


© 2005, Mortimer Zuckerman