In the current age of financial pessimism, Morgan Stanley (MS) does not want to be bested. In a show of unusual courage, its president is predicting that the world of Wall St. will get progressively worse and not emerge from the current crisis for more than a year.

The financial crisis will probably not end until next year or even 2010, Germany’s Handelsblatt newspaper quoted Morgan Stanley (MS) co-President Walid Chammah as saying.

While a number of securities analysts and economists have predicted hard times for the next several quarters, Chammah’s comments are at the cutting edge of financial executives willing to rat out their own industry.

Telling the truth may be back in vogue in the brokerage and banking industries.

It is almost certain that when industry titans say their world is getting worse it means they have looked at the prospects for their future quarters and seen nothing but an abyss looking back at them. The IMF has already said that mortgage-paper-related write-offs will hit $1 trillion. Only about 50% of that has been accounted for in financial company earnings.

Barron’s wrote that the common shareholders of Freddie Mac (FRE) and Fannie Mae (FNM) will be wiped out in a recapitalization by the government. That may only be the beginning of resetting the value of large financial firms.

The industry is now willing to accepting a future it could not stand looking at as recently as a month ago.

Douglas A. McIntyre

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