Crisis far worse than thought, analyst says

Economist Mark Dotzour’s assessment of the financial meltdown mirrored the stock market the past seven days: slam, slam, slam — one downer after another.

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Economist talks about financial meltdown

Oct 9Economist Mark Dotzour talks about the financial meltdown.

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The biggest banks in the world know, but won’t admit, that the bad mortgages they hold are now worth a fraction of their face value — so no one will sell lest they be found out, and banks won’t lend to one another for lack of trust, said Dotzour, chief economist at the Real Estate Center at Texas A&M University.

It’s not a credit crunch, but a "price discovery issue,” he told the Realtors Commercial Alliance and Commercial Real Estate Council of Oklahoma City Thursday.

With the federal government involved, the market is suspended and the crisis will roil on, and private investors will ignore their instincts to buy low until the market is allowed to work, he said.

Let the big banks fail — that’s the only remedy, he said. Now, "there’s just so much hocus-pocus” in the markets and the government that no one knows the value of anything, he said.

That "$700 billion” rescue package? The government made up the number as "shock and awe” to get people’s attention after fudging on the severity of inflation, recession and the meltdown itself.

"It’s nine times worse than anything you’re hearing in the news or on TV,” he said.

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