SINGAPORE (AP) -- Former U.S. Federal Reserve Chairman Paul Volcker said Tuesday the U.S. and Europe face a "considerable recession" as a global financial crisis begins to hurt consumer demand and industrial production.
"I've seen a lot of crisis, but I've not seen anything quite like this one," Volcker said in a speech in Singapore. "I don't think we can escape damage to the real economy. I think we almost inevitably face a considerable recession."
Volcker, 81, said pledges this week by U.S. and European governments to pump hundreds of billions of dollars into ailing banks has helped boost investor confidence.
Asia and European stock indexes rose for a second day Tuesday after the Dow Jones industrials average surged 11 percent on Monday, its biggest one-day jump since 1933.
"These kinds of measures -- government guarantees and interventions -- are really distasteful," said Volcker, who was Fed chief from 1979 to 1987. "However distasteful, I'm afraid they were necessary in this emergency to restore some sense of stability and confidence."
Late Monday in the U.S., government officials and industry executives said the government would use $250 billion of the $700 billion bailout program recently passed by Congress to buy into American banks. The government initially will buy stock of nine large banks, but the program is expected to be expanded to many others.
President Bush is scheduled to announce the details later Tuesday.
"Those banks have been nationalized, overtly or not overtly, which is something that hasn't happened before in the history of developed countries," Volcker said. "How to wean them from government support? That is the challenge of the future."