CFOs say worst over; not so fast

NEW YORK – Wall Street brokerages put on a united front this week when it came to the credit crisis: the worst is behind us, and business is going to improve. But outside their boardrooms, not everyone is convinced things have turned around.

This week, chief financial officers from the big investment banks seemed to read from the same script. Lehman Brothers’ Chris O’Meara proclaimed “the worst of the credit correction” is behind Wall Street; Morgan Stanley incoming CFO Colm Kelleher said “the worst is over,” and Bear Stearns’ Sam Molinaro added “the worst is largely behind us.”

But there is a growing chorus that recession still lurks, even with a recent Federal Reserve rate cut – and that the investment houses are still vulnerable to credit market disruptions, despite their protestations to the contrary.

“If the worst is over, then why did the Fed lower rates 50 basis instead of the 25 that the market was expecting?” said Hugh Moore, a partner with Guerite Advisors. “We had a huge loss of confidence in the markets, and I’m not sure you can give the all clear when there’s still so much uncertainty.”

Indeed, former Fed chairman Alan Greenspan said the chance of a recession will linger as home prices slide and hurt consumers. President Bush acknowledged on Thursday that the U.S. is in “some unsettling times.”