Morgan Stanley CEO John J. Mack says the whole world will slow and that sluggish growth could last into 2010.
"Clearly 2009 is going to be a slow period of growth for the United States and the world," he told CNBC. "It could be a year, or more" before a recovery.
"Credit has absolutely dried up," Mack said.
The unwinding of the global shadow banking system is taking its toll on everyone, Mack admitted, and he suggested that Morgan Stanley might shrink in size as a result.
"We’re all learning that leverage works both ways," Mack said. "Any time you take a business running at 30 times (leverage) and take it down to 16 to 17, that changes the nature of your business. We have to look at that and resize it.”
Morgan Stanley this week agreed to sell a 21 percent stake to Mitsubishi UFJ Financial Group for $9 billion. On Tuesday, the bank agreed to sell $10 billion of its preferred stock to the U.S. Treasury.
The consensus view of economists polled by Reuters is that the U.S. economy will shrink for three successive quarters, something not seen since 1974-75.
"With GDP in rapid decline, we look for recessionary conditions to produce a rapid rise in unemployment and worsening corporate profits," Peter Kretzmer, U.S. economist at Bank of America in New York told the wire service.
"The downturn is also being felt around the world."
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