Greenspan Says Recession Odds More Than Third Even With Fed Cut

By Steve Matthews and Albert R. Hunt
Sept. 20 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the odds of a recession remain ``somewhat more'' than one in three even after this week's reduction in interest rates, with home prices likely to drop further and hurt consumer spending.

"Remember, we still have a problem out there, which is a large overhang of unsold newly constructed homes,'' Greenspan said in an interview today following the publication of his book, "The Age of Turbulence.'' Home prices ``are down only about 3 percent but they are clearly moving lower.''

The Federal Reserve on Sept. 18 lowered its benchmark interest rate by half a percentage point, saying tougher credit standards had the potential to hurt economic growth. Economists said this week's action was similar to Greenspan's approach in taking preemptive measures to reduce the risks of recession.

"We would expect to find some erosion in consumer expenditures, but we haven't seen it yet,'' Greenspan said.

Greenspan said in an earlier interview on the 60 Minutes program that he had more flexibility to lower rates as chairman than his successor Ben S. Bernanke does, because inflationary pressures today are a greater threat.