Regional President Speech

Remarks on the U.S. Economy James Bullard President and CEO Washington University in St. Louis Olin Business School December 4, 2008 Real GDP Around Business Cycle Peaks Index Peak = 100 106 1981-82 1990-91 2001 104 2007 Q4 MA Forecast (Nov-7) 102 100 98 96 94 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Quarters from Peak Consumption Around Business Cycle Peaks Index Peak = 100 108 1981-82 1990-91 106 2001 2007 Q4 104 MA Forecast (Nov-7) 102 100 98 96 94 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Quarters from Peak Real Retail Sales Around Business Cycle Peaks Index Peak = 100 110 1981-82 1990-91 2001 2007 Q4 105 100 95 90 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 Months from Peak Residential Investment Around Business Cycle Peaks Index Peak = 100 150 1981-82 140 1990-91 2001 2007 Q4 130 MA Forecast (Nov-7) 120 110 100 90 80 70 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Quarters from Peak Real House Prices Around Business Cycle Peaks Index Peak = 100 112 1981-82 110 1990-91 2001 108 2007 Q4 106 104 102 100 98 96 94 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Quarters from Peak Business Fixed Investment Around Business Cycle Peaks Index Peak = 100 110 1981-82 108 1990-91 2001 106 2007 Q4 104 MA Forecast (Nov-7) 102 100 98 96 94 92 90 88 86 84 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Quarters from Peak Unemployment Rate Around Business Cycle Peaks Index Peak = 100 150 1981-82 142 1990-91 2001 2007 Q4 134 MA Forecast (Nov-7) 126 118 110 102 94 86 78 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 Months from Peak Nonfarm Payroll Employment Around Business Cycle Peaks Index Peak = 100 101 1981-82 1990-91 2001 100 2007 Q4 MA Forecast (Nov-7) 99 98 97 96 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 Months from Peak Manufacturing Industrial Production Around Business Cycle Peaks Index Peak = 100 105 1981-82 1990-91 2001 2007 Q4 100 95 90 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 Months from Peak Comparison of Financial Sector Loss Estimates, October 2008 (In Billions of U.S. Dollars) Base Case Estimates of Losses on U.S. Loans Outstanding Estimated Loss Estimated Loss Oct. 2008 Apr. 2008 GFSR Oct. 2008 GFSR As of Loss as Percent of Outstanding Oct. 2008 Subprime Residential $300 45 50 16.7% Alt-A Residential 600 30 35 5.8% Prime Residential 3,800 40 85 2.2% Commercial Real Estate 2,400 30 90 3.8% Consumer Loans 1,400 20 45 3.2% Corporate Loans 3,700 50 110 3.0% Leveraged Loans 170 10 10 5.9% Total for Loans $12,370 225 425 3.4% Source: Global Financial Stability Report, IMF. Comparison of Financial Sector Loss Estimates, October 2008 (In Billions of U.S. Dollars) Base Case Estimates of Mark-to-Market Losses on Related Securities Estimated Mark-to-Market Loss Oct 2008 Loss as % of Outstanding April 2008 Oct. 2008 Outstanding GFSR GFSR As of Oct. 2008 ABS $1,100 $210 210 19.1% ABS CDOs 400 240 290 72.5% Prime MBS 3,800 0 80 2.1% CMBS 940 210 160 17.0% Consumer ABS 650 0 0 0.0% High Grade Corporate Debt 3,000 0 130 4.3% High Yield Corporate Debt 600 30 80 13.3% CLOs 350 30 30 8.6% Total for securities $10,840 720 980 9.0% Source: Global Financial Stability Report, IMF. Comparison of Financial Sector Loss Estimates, October 2008 (In Billions of U.S. Dollars) Base Case Estimates of Losses on U.S. Loans and Related Securities Estimated Loss Oct. 2008 Outstanding April 2008 Oct. 2008 Loss as Percent of As of GFSR GFSR Outstanding Oct. 2008 Total for Loans $12,370 225 425 3.4% Total for Securities $10,840 720 980 9.0% Total for Loans and $23,210 945 $1,405 6.1% Securities Source: Global Financial Stability Report, IMF. Comparison of Financial Crises Percent Billions of U.S. $ 1600 40 Other Financials (Left Scale) 1400 Banking Losses (Left Scale) 35 Percent of GDP (Right Scale) 1200 30 1000 25 800 20 600 15 400 10 200 5 0 0 U.S. Savings & Loan Japan Banking Crisis Asia Banking Crisis U.S. Subprime Crisis Crisis (1986-95) (1990-99) (1998-99) (2007-present) Source: World Bank and IMF staff estimates LIBOR – OIS Spread (Daily data as of Dec. 1, 2008) Basis Points 6 5 4 3 2 1 0 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 3-Month LIBOR (London Interbank Offered Rate) 3-Month Expected Fed-Funds Rate (Overnight Interest Rate Swap (OIS) Rate) Remarks on the U.S. Economy James Bullard President and CEO Washington University in St. Louis Olin Business School December 4, 2008

James Bullard (2008, December 3). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20081204_james_bullard

@misc{wtfs_regional_speeche_20081204_james_bullard,
  author = {James Bullard},
  title = {Regional President Speech},
  year = {2008},
  month = {Dec},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20081204_james_bullard},
  note = {Retrieved via When the Fed Speaks corpus}
}