The comments, made at a meeting of the World Economic Forum in the northern Chinese port city of Tianjin, come as the U.S. Congress continues to wrangle over a $700 billion package to rescue the U.S. financial system.
'I think it's fair to say we're in the worst financial crisis since the Great Depression,' William Rhodes, senior vice-chairman of Citigroup, told the forum.
Rhodes, who famously predicted the subprime crisis early last year, well before its effects started to be felt, said urgent steps were needed to revive confidence in financial markets.
'Until you restore that confidence, I think we have some real problems in the overall economy worldwide,' Rhodes said.
'We're now starting to feel the effects of the real economy,' he said, adding that U.S. economic growth would probably slow over the next few quarters.
Stephen Roach, Asia chairman of investment bank Morgan Stanley, called for 'forceful and effective' action to bring the situation under control and said the world economy was doomed for a period of slow growth that would probably last through 2010.
He said weakness in the U.S. residential housing market was likely to spread to personal consumption, which he said had been sustained in recent years by bubbles in property and credit.
'America has been on the biggest consumption binge of any large economy in recorded history,' Roach told the forum.
'The American consumer is toast, done, finished.'
GLOBAL COORDINATION
Roach criticised the U.S. Federal Reserve for having kept interest rates relatively low for a prolonged period. This had set the price of risk too low and thus led to the property and credit bubbles.
'We had a huge blunder in monetary policy. We need to rethink the role of monetary policy in an increasingly sophisticated set of financial markets,' he said.
Citi's Rhodes said that what needed to come out of the current crisis was better global coordination on financial issues, particularly some form of international accounting standards and internationally accepted regulatory norms.
He noted that Chinese authorities, notably the People's Bank of China, were in consultations with the Federal Reserve on measures to alleviate the crisis. He did not elaborate.
'One of the things that's coming out of here is that the major central banks of the world are talking about making liquidity facilities available in various currencies,' he said.
Rhodes said there was also a need for a worldwide clearing system to handle the huge market in over-the-counter credit default swaps.
European Union Trade Commissioner Peter Mandelson agreed that the crisis exposed the need to improve global financial oversight.
'And it's an international system in which not just the G7 or G8 and the OECD will be reaching out and inviting the so-called emerging economies in for a cup of tea every now and again or a coffee to hear their views and then politely ask them to leave as we take the decisions,' Mandelson told the forum.
'The world is completely changed irreversibly, and for the better.'
(Reporting by Jason Subler; Editing by Alan Wheatley) Keywords: FINANCIAL BANKERS/ tf.TFN-Europe_newsdesk@thomson.com ra COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2008 AFX News
