Fed's Lockhart says credit markets still unstead

SEA ISLAND, Georgia (Reuters) - Federal Reserve Bank of Atlanta President Dennis Lockhart said on Monday that financial market conditions remained fragile amid a crisis of confidence triggered by the subprime mortgage crisis.

"As we begin this year's conference, the still unsteady condition of credit markets is no doubt at the top of the mind for most," he said during welcoming remarks for the Atlanta Fed's annual financial markets conference on Sea Island.

The U.S. central bank has slashed interest rates by 3.25 percentage points to 2 percent since September to shield the economy from a credit crunch sparked by the housing crisis, which also has forced it to pump billions of dollars into financial markets to prevent them from seizing up.

"Since last May, problems with subprime mortgages have triggered profound and worrisome consequences, not least of which is a crisis of confidence among counterparties."

"Several times in recent months, interbank credit markets have seized up and required aggressive and creative central bank actions," said Lockhart, who is not a voting member of the Fed's interest rate-setting committee this year.

"In the United States and other developed nations, economic growth has slowed substantially," he added.

The crisis has prompted a massive re-examination of the U.S. regulatory system amid claims that the authorities, including the Fed, failed in their duty to prevent risky lending that is at the root of the housing market's problems.

Lockhart acknowledged there would be changes, but warned of the risks of going too far.

"Recent events will very likely initiate a new round of financial reforms."