Morgan Stanley CEO says end to trouble nearer

By Joseph A. Giannone

PURCHASE, New York (Reuters) - Morgan Stanley Chief Executive John Mack on Tuesday said financial markets are the most difficult he has seen in 40 years, but there are several signs investment banks are closer to working through their painful mortgage and corporate loan woes.

The United States is nearing the end of the subprime mortgage crisis, Mack said, though adding he is still concerned about more potential losses stemming from commercial mortgages, European markets and mid-size U.S. banks.

"It's going to be a difficult year for the Street. If you think about all the moving parts .... I think the Street has a lot of work to do," said Mack. "We're making progress, but there are still concerns."

Speaking on the sidelines of Morgan Stanley's annual meeting in Purchase, New York, Mack predicted the financial crisis that has hammered banks for the past year will continue to challenge banks for several more quarters.

He cited news from UBS last week disclosing an additional $19 billion in mortgage and other debt losses, which sparked talk that there is more bad news ahead from the financial sector. UBS last year posted $18 billion of losses.

BALLGAME ALMOST OVER

Still, Mack offered upbeat predictions that the markets for mortgages and leveraged loans used to finance big buyouts may soon be out of the woods.

"If you look at the subprime problem in the U.S., you would say were in the eighth inning or maybe the top of the ninth," of a nine-inning baseball game, Mack said. "Leveraged lending, as we know it, is in the ninth inning."