Will Tough Economic Times Persist in New Year? The subprime woes and the resulting foreclosures is the biggest economic story of 2007. What are the economic ramifications of the sharp dive in the subprime mortgage markets, or the recalls for defective toys in China? And what are the prospects for 2008?

Will Tough Economic Times Persist in New Year?

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LINDA WERTHEIMER, host:

The sharp dive in subprime mortgage markets and the resulting credit and housing crunches defined the financial sector in 2007. But there were other factors that influenced the markets.

Joining us to look back over the past year on Wall Street and ahead to 2008 is our friend from the business world Joe Nocera. He's in our studios at New York.

Welcome, Joe.

Mr. JOE NOCERA (Columnist, The New York Times): Thanks for having me, Linda.

WERTHEIMER: The subprime woes. Now that was the big business joy of 2007. And is it going to continue to be a big story in 2008 and beyond?

Mr. NOCERA: Most certainly, on two levels. It's had an incredible effect both on Wall Street and on Main Street. On the Wall Street level, how much worse is it going to get? I mean, Wall Street banks have already written off billions of dollars in mortgage paper that they held. And they're going to write off billions more in the coming year. Nobody knows how bad it's going to be. And the same is true on Main Street.

The truth of the matter is there is going to be an enormous number of foreclosures in 2008 and probably into 2009. Probably well over a million people will lose their homes because they signed onto mortgages that they couldn't really afford. And your house is probably worth less today than it was at the beginning of the year. And there's a very good chance it will be worth less at the end of 2008 than it is today.

WERTHEIMER: Is this the end of the Greenspan era? Mr. Greenspan has been defending himself lately against what he admits were some missteps, I suppose, failure to regulate?

Mr. NOCERA: In Alan Greenspan's world, all the missteps appear to have been made by other people. His record is not very good on this issue. He could have done things earlier. He could have tried to tighten standards. He could have, at least used his bully pulpit to raise alarms about subprime and he did none of that. The most telling fact is that the current Fed chairman, Ben Bernanke, is behind the Federal Reserve effort, which will do exactly what Greenspan didn't do, which is tighten lending standards and make it harder to give loans to people who can't afford to pay them back.

WERTHEIMER: Let's move on to China, which was another big business story in 2007. I think most of us focused on the recalls of defective and dangerous toys. Do you think that everybody looking at China as we think about the Beijing Olympics? Will we see China change?

Mr. NOCERA: I do think China will change on this issue, but not necessarily because of the Olympics. If you're going to have globalization, everybody has to be able to play by the same rules, and everybody has to be able to count on the other party to do what they're supposed to do. So what's really going to happen is economics is going to solve this problem. It's a good lesson for the Chinese that contracts, global rules are there for a reason, and you renege on them or ignore them at your economic peril.

WERTHEIMER: Let's move on to the tech sector. The iPhone was introduced. How was it doing?

Mr. NOCERA: It's a hit.

WERTHEIMER: And are people going to develop new products and compete, and make it even more interesting in 2008?

Mr. NOCERA: Oh, absolutely. People are going to devise products that look more and more like the iPhone. But you're going to see all of these devices kind of merge and compete. And, you know, Google is another company that's done extraordinary well this year. And one of the big rumors for 2008 is that Google will get into the cell phone business and begin to not just make mobile software but basically cell phones.

WERTHEIMER: So can Google keep doing this, just pushing and pushing - the sky is the limit?

Mr. NOCERA: Well, one of my hard-and-fast business theories, Linda, is that nothing lasts forever. Someday, some young kid is going to wake up and figure out a company that's going to give Google fits. It's not just going to be for awhile, and they will continue to dominate the tech landscape, I think, for the foreseeable future.

WERTHEIMER: New York Times columnist Joe Nocera. He joins us from New York City.

Joe, thank you for being with us.

Mr. NOCERA: My pleasure.

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