HONG KONG, Oct 22 (Reuters) - U.S. Treasury Undersecretary David McCormick said on Wednesday that the U.S. economy is in for a challenging few quarters but could start to recover late next year.
"The coming quarters will be very challenging," McCormick told a lunch in Hong Kong. However, he said the U.S. economy was resilient despite challenges posed by turmoil in the financial sector.
"Our hope is that (the U.S. economy) will turn upward toward the end of 2009," he said.
Financial markets had responded positively in some ways to concerted action by governments around the world to calm financial turmoil, but much work remained, he said. "The name of the game is to bring back confidence to the financial market," he said.
U.S. government action in the past two months, including giving the U.S. Treasury broad authority to buy and insure mortgage assets and equity securities from financial institutions, had helped stabilize financial markets.
If the Treasury had had such authority in September, the outcome for Lehman Brothers (LEHMQ.PK: Quote, Profile, Research, Stock Buzz), which the U.S. government let collapse, might have been different, he said.
"There was no obvious buyer (for Lehman)," McCormick said when asked why Lehman Brothers was allowed to collapse but rival investment bank Bear Sterns was saved.
"Lehman also had a much bigger balance sheet and the U.S. Treasury did not have the authority it has now," he said. "If the Lehman situation was now, it might have been a very different outcome." (Reporting by Susan Fenton; Editing by Ken Wills)
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