Central bankers past and present warned Tuesday of more pain to come for the U.S. economy and said banks worldwide could take several months yet to realize their full losses from U.S. subprime mortgage lending.
"We have several more months to get through before the banks have revealed all the losses that have occurred and have taken measures to finance their obligations that result from that, but we're going in the right direction," Mervyn King, the governor of the Bank of England, told the BBC.
Meanwhile, Alan Greenspan, former chairman of the Federal Reserve, told a forum in Tokyo that high inventories of unsold homes presented a major risk to the U.S. economy and that he was not sanguine about how quickly the glut could be reduced.
"We still need to accelerate the rate of inventory liquidation, and that will mean bringing housing starts down and sales up; we have a long way to go," said Greenspan, who was answering questions via video link from Washington.
Charles Prince 3rd, the head of the U.S. banking giant Citigroup, quit Sunday, taking the blame for expected losses of $8 billion to $11 billion before taxes, on top of $6.5 billion the bank wrote off three weeks ago. Prince's departure came five days after Merrill Lynch ousted its chief executive, E. Stanley O'Neal, following an $8.4 billion write-down. Citigroup on Tuesday named a veteran financial expert, Richard Stuckey, to head a new team managing its subprime mortgage portfolio, a move taken positively by the U.S. stock market.
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