Fears of longer credit crisis set to hit Wall St

Wall Street stocks were set for a lower start on Tuesday after a leading banking analyst said the credit crisis will extend well into 2009 and possibly beyond and a rise in core inflation threatened to trim corporate profits and consumer spending.

According to Meredith Whitney and a team of analysts from Oppenheimer, the extended credit crisis will results in "multi-billion dollar revenue reversals" and further significant writedowns and loan loss provisions.

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The culprit is less the writedowns themselves than the "shut-down" in the securitization market which at its height provided 66 per cent of household borrowings in the first quarter of 2007.

Without that market consumer liquidity will come under increasing strain, something that will "push more consumers into precarious credit positions and cause consumer credit losses to be far worse than what is currently estimated, even by the most draconian of investors."

Financial Times