"Dr. Doom" calls credit crisis a "global calamity"

NEW YORK (Reuters) - The Federal Reserve contributed to the "global calamity" of the subprime mortgage debt crisis by allowing credit to expand excessively and failing to spot major changes in financial markets, Wall Street economist Henry Kaufman said on Friday.

He also criticized the overhaul of the U.S. financial regulatory structure proposed by the Bush administration as too complicated and lacking in focus.

"The Fed itself has contributed largely to the current debacle by failing to properly gauge and contain credit expansion in recent decades, while simultaneously providing only tepid oversight of commercial banking," said Kaufman, who is founder and chairman of financial consulting firm Henry Kaufman & Company, Inc.

"We should therefore not see it (the Fed) as the ready savior in the current crisis," he added.

His remarks were in a prepared speech to a conference sponsored by The Global Interdependence Center and Drexel University's LeBow College of Business in Philadelphia.

"The current credit crisis - with its epicenter in the U.S. mortgage market - is global news, a global calamity that might just be the most serious upheaval in American financial markets since the end of the Second World War," Kaufman said.

Global financial institutions have so far sustained well over $200 billion of write-downs and credit-related losses, with the ailing U.S. housing market acting as a central catalyst.

He called for the creation of a Federal Financial Oversight Authority to regulate and oversee the biggest U.S. financial institutions.

Kaufman became known as "Dr. Doom" for correctly forecasting higher inflation and interest rates when he was chief economist with Salomon Brothers in the 1970s and 1980s.