- Alan Greenspan: Economy in ‘once-in-a-century’ crisis

The U.S. credit squeeze has brought on a “once-in-a-century” financial crisis that is likely to claim more big firms before it eases, former Federal Reserve chief Alan Greenspan said Sunday.

Greenspan told ABC’s “This Week” that the situation “is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go.”

“Indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes,” Greenspan said. He predicted that would not happen until early 2009, and said the odds of U.S. recession have gone up in recent months.

“I can’t believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring,” he said.

- Lehman Might File for Bankruptcy Manana

Lehman’s survival remains in doubt. The Lehman executive, who declined to be identified, said “this looks like the end.”

Lehman would be the biggest bank failure in 18 years.  Note that earlier this year when Bear Stearns cratered, some people suspected Lehman Bros. was next, but a lot of people [smarter than me] said “it could not happen”.  The Feds stepped in to save Fannie Mae and Freddie Mac, but after Barclay’s removed its offer and Bank of America began merger talks withMerrill Lynch, things started to look ominous.

A Lehman failure would have major, major repercussions… and might actually take down stronger players like Merrill Lynch (if it does not merge or sell before) and even a powerhouse like Goldman Sachs, hence why a 12th hour agreement remains possible.

Make no mistake about it, this helps no one, and that explains why banks are lining up to shore up competitors, to avoid a domino effect that could take down the entire financial system.