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(WASHINGTON) Former Federal Reserve chairman Alan Greenspan said that falling US home prices are ‘nowhere near the bottom‘ and the resulting market turmoil is not showing signs of abating.

While the odds of a recession are 50-50, achieving stable markets will ‘take a while’, he said on Thursday in a CNBC interview.

The economy grew at a 1.9 per cent annualised rate in the second quarter after expanding 0.9 per cent in the first quarter, the Commerce Department said. Gross domestic product was revised to show a contraction in the final three months of last year.

More Americans filed claims for unemployment insurance last week than at any time in more than five years, the Labor Department said.

Consumer prices increased 5 per cent in the 12 months to June, the most since May 1991. The core rate, excluding food and energy, increased 2.4 per cent from June 2007.

Fannie Mae and Freddie Mac, the largest sources of money for US home loans, are a ‘major accident waiting to happen’, Mr Greenspan said.

‘The solution’ is the ‘nationalisation’ of the companies, a restructuring involving an infusion of taxpayer money and eventual sale back to the market as ‘five or 10 separate entities’, he said.

‘It’s important that we focus on stabilising the financial system.’

Policymakers also need to reconcile slowing economic growth with rising prices, he said. The Fed had to open up lending to securities firms to curb turmoil in financial markets, he said.

Still, Mr Greenspan said that he was ‘uncomfortable’ with aspects of the Bear Stearns Cos rescue. ‘That is a fiscal policy operation, essentially something which should be set up in the Treasury Department.’ - Bloomberg