NEW YORK (Reuters) - Top financial executives see no quick end to the global economic storm, warning this week that the current crisis could hold more surprises due to looming credit card debt.
The United States is leading the world into a recession, and perhaps worse, and executives at the Reuters Global Finance Summit said it was hard to make any predictions due to a dire mix of bruised markets, strained governments, and a worried public.
But some things are clear.
"You have to believe that we have frightened the American consumer pretty deeply here," said Ed Clark, chief executive of Toronto-Dominion Bank (TD.TO: Quote, Profile, Research, Stock Buzz), North America's seventh-largest bank.
"It's hard not to believe that they're not going to go on strike for a period of time," he told the Reuters Summit. "And it's hard to see the positive element that's going to save us from having a deep recession,"
Executives told the Reuters Summit the mortgage-inspired crisis infecting markets will likely be followed by even bigger problems borne out of growing credit card debt.
A credit card crisis "is waiting in the wings," said John Whitehead, former chairman of Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) and former U.S. Deputy Secretary of State under President Ronald Reagan.
"It's so similar to the mortgage situation that it's shocking when you think about it," he said.
Banks are already reporting losses in both credit cards and home equity loans. "How far will housing prices go down? How high will defaults on credit cards go? How high will defaults on auto loans go?" asked Gary Parr, deputy chairman at investment bank Lazard Ltd (LAZ.N: Quote, Profile, Research, Stock Buzz).
A credit card collapse would further squeeze the financial sector. Americans had accumulated $971.4 billion in revolving consumer debt at the end of September, up 3.4 percent from the end of 2007, according to the U.S. Federal Reserve.
"Unlike collapses of the past, where the finance industry just brushed it off, kept going, they're right there at the vortex of the storm," Joseph Perella, CEO of boutique merger advisory firm Perella Weinberg Partners, told the Reuters Summit.
"The industry is the problem, it's not a subset of it. It's not a containerized explosion."
'401(K) CRASH'
Just how long consumers keep their wallets closed is a guessing game, particularly given the surprise that met the current crisis.
Last year's collapse in real estate prices stung big banks that held mortgage-related securities. It toppled global institutions, such as investment bank Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research, Stock Buzz), and forced governments to step in to save others. Continued...
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