What follows is from Crikey on Thursday.
http://www.crikey.com.au/Business/20070823-Subprime-expert-forecasts- more-pain.html
He [McDonough] forecast up to possibly six more months of unease in financial markets as things got sorted, more problems to emerge post September 30 when assets have to be marked to markets, and big losses, especially from European banks.
And he also forecast that the US Fed would be forced to cut rates by 0.25% to 0.50% before the next meeting in mid-September.
According to notes of the discussion distributed within clients of Merrill late yesterday McDonough said that the current lack of liquidity in credit markets is very different to previous financial market "events."
He discussed his role with the LTCM crisis, saying that it was relatively straight forward to fix given there were 17 institutions exposed to the $US1.2 trillion of off-balance sheet positions -- of which 14 were prepared to take on the risk when told there would be no government-backed rescue.
He told the Merrill clients that only time will repair the damage as markets cautiously re-discover what elements of the credit markets are safe. In his opinion if you are optimistic, credit markets will clear in Nov of this year but a more realistic assessment would suggest the first quarter of next year.