The US financial crisis deepened on Monday with the collapse of Lehman Brothers and the bailout of investment bank Merrill Lynch by Bank of America. In an interview from New York, David Wyss, Chief Economist, Standard and Poor's, told Shobhana Subramanian that while the pain in the US market wasn't over yet, the problems in Japan and the UK could probably be worse.

The losses from the sub-prime crisis appear to be increasing?

Well the losses from sub-prime directly appear to be in line with the $400 billion originally anticipated. However, there are a lot of derivative losses down the line and so I believe the $ one trillion estimate should probably hold. Certainly, there is some pain left it will take a while before things are back to normal.

What does this mean for global growth?

Well, the UK may actually be in worse shape than the US, the housing bubble was bigger there and their banking system is not so well capitalised. Japan too seems to be in as bad shape as the US. Clearly, the industrial world is in a recession and it should stay this way till early next year.

What do you make of the liquidity situation in the US?

The smaller banks which lend to smaller businesses are in reasonably good shape and should continue to lend. But the real problem is with the big investment banks. So big businesses could find it difficult to borrow to run their operations.

Will fund managers liquidate their positions in Asia?

I don't see big liquidation in those markets because the assets are of good quality. Both India and China continue to grow and most of the money is long-term money rather than hot money. However, it's possible that Asian money or middle-east money is pulled out of the US.

Do you see M&A picking up?

Buy low and sell high is still a good idea. Yes, I do think there will be people out there hunting for bargains.