World Bank President James Wolfensohn 'Pessimistic' as Financial
Losses Rise
Former World Bank President James Wolfensohn said he's ``pessimistic''
on the outlook for financial markets and predicted losses from the
global credit turmoil may climb to $1 trillion.
``I'm more pessimistic than optimistic,'' Wolfensohn, 74, said an
interview today in London. ``That doesn't necessarily mean a crash,
but it means we're not through the woods yet. There are continued
dangers.''
U.S. Treasury Undersecretary Robert Steel forecast last week that
tighter credit conditions ``will take a while to work through.'' Banks
worldwide have re****ted more than $309 billion of writedowns and
credit losses caused by the U.S. subprime collapse and the seizure in
credit markets.
``It does seem to be a major adjustment on any level,'' Wolfensohn
said, after addressing the European Pensions and Savings Summit 2008.
``There may be a $1,000 billion worth of losses in it somewhere.'' He
said he ``cannot recall anything similar, certainly in the last 30 to
40 years that I've worked.''
The International Monetary Fund predicts that losses from the crisis,
including those tied to commercial real-estate, may total $945 billion
and says global economic expansion may be the slowest since 2003 this
year. Wolfensohn said the fund's loss forecast of about $1 trillion is
now a ``consensus estimate.''
Emerging Markets
Emerging markets ``have enormous internal growth and are expanding in
other markets such as Africa,'' he said. ``When you're walking around
Beijing or Shanghai, it's hard to feel pessimistic. If you can
breathe.''
Still, in the U.S. and U.K., the impact of the credit crisis ``is
likely to be substantial,'' Wolfensohn said.
Steel said in a Bloomberg Television interview on April 25 that there
will be ``bumps and fallbacks'' as financial institutions recover from
the collapse of the U.S. subprime mortgage market.
Governments in the U.S. and elsewhere are doing their best to prevent
the credit squeeze from deepening, Wolfensohn said. Finance ministers
``are talking about nothing else,'' he said.
``The crisis that you observe is never the same as the last one,''
Wolfensohn said. ``We have a capacity to invent new ones.''
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