Credit crisis worsens, Alan Greenspan says the Fed is powerless

Fallout from the sub-prime mortgage crisis wreaked further havoc as Bank of America, Wachovia and PNC all said that investment write-downs would be worse than forecast as the credit crunch worsened.

Kenneth Lewis, Bank of America’s chief executive, said the credit markets “have turned down again and will probably remain challenging into next year.”

Kennedy Thompson, Wachovia’s chief executive, described the credit markets as the toughest in his 32-year career and said that no one knew when the situation would improve.

Alan Greenspan, the former Federal Reserve chairman, described the sub-prime mortgage crisis as an “accident waiting to happen” as a period of unprecedented global growth lulled investors into a false sense of security.

Mr Greenspan noted: “After more than half a century observing price bubbles evolve and deflate, I have reluctantly concluded that bubbles cannot be safely defused by monetary policy or other policy initiatives.”

[Excerpt of an article by Tom Bawden, The Times]

The chairman of investment bank Morgan Stanley's Asian arm, Stephen Roach, says the United States economy is headed towards recession and the rest of the world should be concerned.

[The Sydney Morning Herald]