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Bill Griffeth, Co-Anchor:
We’re back here, with John Kiefer, who’s the CEO of First Capital.
And you’ve been practicing as much as I have, trying to put one on there, haven’t you?
John Kiefer, CEO, First Capital:
Yes, I have.
Griffeth:
Golf is a difficult enough game to play. But when you add a crowd, it just adds a whole new dimension, doesn’t it?
Kiefer:
Oh, I’ve never played in front of a crowd before.
[Laughter]
Griffeth:
It ain’t easy, let me tell you.
Kiefer:
Fortunately they have the wire to protect us.
Griffeth:
Yes, they can’t get to us here, stuck behind the ropes.
Can you believe how much liquidity is in this market right now?
Kiefer:
It is amazing, although we see these spreads, we’re tightening for a while. And we are starting to get margin compression. But, recently, it seems to have reversed itself. I can’t tell you why, but there may be some, drying up of liquidity—possibly because of the subprime issues.
Griffeth:
Where are we in now? We haven’t heard much about it lately. I mean, we were all focusing on the subprime mortgage meltdown—the foreclosure rate rising, and all, been pretty quiet lately. Is that cooling off, or no?
Kiefer:
And I think we’re probably at the tip of the iceberg.
Griffeth:
Really?
Kiefer:
I think there’s been a lot of very aggressive lending, not only by hedge funds and subprime lenders, but by the banks as well. And it seems we have to go through these cycles every ten or fifteen years before it comes to a bubble, and a lot of pain and blood in the Street.
Griffeth:
Does it remain isolated to the housing market, or does it become a problem to the whole economy, do you think?
Kiefer:
Well, I think it’s going to affect other segments of the economy—clearly auto. You know, we of course saw GM’s announcements this morning and consumer debt in general you know, those areas. I don’t think it brings the whole economy down. I think we’re enjoying a very robust economy, and we have some very strong fundamentals. Money is still relatively cheap and available.
Griffeth:
Do you chock it up to the normal business cycle—the ebb and flow of the housing market? Or could this have been avoided? Were lending standards way too lenient for a while?
Kiefer:
Well, I think that the lending standards were too lenient, and not by the banks. But it’s you know, I have been, obviously was in business for about forty years, and seen this cycle come and go. And as predictable as it is, it seems it’s never avoidable.
Griffeth:
So, does the Fed have to do anything to clean up the damage? Do they have to cut rates, do you think, at some point?
Kiefer:
Well, I don’t think we’re there yet, because we’re still at historically relatively low rates.
Griffeth:
Thankfully, I guess! Right?
Kiefer:
Yes, thankfully. I don’t envision any major move by the Fed. Frankly, everything I read and hear—they are going to probably stay pretty much status quo for the balance of the year.
Griffeth:
[Pointing at golf club] You want to try one?
Kiefer:
Sure [laughs].
Griffeth:
Not only are you going to have to try it in front of a crowd, but then you get to do it on live television as well. John Kiefer, putting one on number seventeen here at Sawgrass.
[Kiefer tees off]
Griffeth:
That’s a good one! That’s one of your best, John.
Kiefer:
Almost, almost!
Griffeth:
Nice try. It’s very tough to keep it on the green there. Nicely done, nice to see you.
Kiefer:
Thank you.
Griffeth:
John Kiefer, the CEO of First Capital, joining us here in New York City.