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 reported
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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