Wall Street to Ben: Give Me a Break!

It's the question economists most love to debate these days: Will the housing slump cause a broad economic recession?

Greenspan says it might. But, although it's sometimes hard to remember, he is no longer the one we're supposed to listen to. No, Ben Bernanke is now the chairman of the Federal Reserve, and he seems to see no evidence that the housing troubles have spread, according to notes from the bank's March policy meeting. In fact, the notes suggest that things are so rosy that the Fed may actually have to raise rates in order to slow inflation down.

But the chief economists at three major Wall Street firms say Bernanke is dead wrong, according to a Bloomberg News report. Merrill Lynch, Goldman Sachs and UBS see Bernanke's glass half empty. They all predict the Fed will have to cut rates several times this year in response to a slowing economy. Housing prices still have room to fall, they say, even as the Fed says it sees signs of stabilization in most regions.

So who reads the tea leaves better, the public or the private sector? Only time will tell. Meanwhile, the economy continues to tread water even with the flood of mixed messages from economic indicators. The government said on Friday that the economy grew at its slowest pace in four years during the first quarter. Personal income rose sharply in March, but spending slowed down more than expected and construction spending increased.

Tarot card reading, anyone?

by Megan Barnett

Photo by: Kevin Lamarque/Reuters /Landov

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