Credit crisis end still not in sight: Crandall

NEW YORK (Reuters) - There is still no end in sight to the credit crisis that has gripped global markets since last August, Louis Crandall, chief economist at Wrightson ICAP, said on Monday.

"We are past a couple of points of extreme fragility and risk" in the crisis, but any progression out of it "may not be linear," Crandall said at the Reuters Investment Outlook Summit in New York.

One of those points came in mid-March when the Federal Reserve and JPMorgan Chase had to rescue Bear Stearns, the fifth biggest U.S. investment bank.

Crandall said he did not expect another event similar to Bear Stearns.

Investors have closely watched big U.S. financial firms in recent days, and paid particularly close attention to Lehman Brothers Holdings Inc LEH.N, which on Monday raised $6 billion of capital after it said it expects to post a $2.77 billion quarterly loss due to trades and hedges gone sour.

Financial institutions could come under more pressure from commercial mortgages, Crandall said.

Many of the hundreds of billions of global banks' losses over the past 10 months have come from the meltdown in subprime mortgage debt and other securities associated with the sliding U.S. housing market. Some economists now warn that the U.S. commercial real estate market may also slip into a downturn, with more repercussions on the banking sector.

The decline in residential U.S. real estate values has taken a heavy toll on the asset-backed subsector of the commercial paper market, a cornerstone of lending for companies.

Despite some recent tentative signs that the erosion of the U.S. commercial paper sector may be stabilizing, Crandall said: "If economic conditions are worse than we thought in the second half, we may see some individual issuers with problems."

Crandall expects U.S. gross domestic product to expand a modest 1 percent in the second half of the year.

If crude oil prices remain around $130 per barrel, after hitting record highs above $139 last week, "the outlook for U.S. spending is radically worse than we thought," he said.

(For summit blog: summitnotebook.reuters.com/)

(Reporting by John Parry and Jennifer Ablan; Editing by Leslie Adler)