Speaking at the company’s annual banking and financial services conference, Mr Thain said while he was cautiously optimistic about the future of the financial services industry, he lacked optimism about the near-term prospects of the US economy and global markets.

“Right now, the US economy is contracting very rapidly. We are looking at a per­iod of global slowdown,” Mr Thain said. “This is not like 1987 or 1998 or 2001. The contraction going on is bigger than that. We will in fact look back to the 1929 period to see the kind of slow­down we’re seeing now.”

Mr Thain also said the economic problems afflicting the US, where housing prices and other asset values were falling, would wreak havoc across the world.

“There is no such thing as decoupling,” he said, referring to the popular theory that emerging markets could sustain reasonable growth even while the world’s leading economies suffered recessions. “All equity markets are linked. Each individual economy will be more or less affected, depending on reliance on global trade and commerce.”

But Mr Thain expressed cautious optimism about the financial services industry. Referring to the US government’s $700 billion bail-out package and the direct infusion of $125 billion to recapitalise the country’s biggest banks, he said “all of that is starting to take effect”.

Mr Thain noted US dollar London interbank offered rates were starting to come down and the commercial paper market was starting to see a return of liquidity. Merrill itself recently issued some three-month commercial paper, he said, instead of the overnight paper that had dominated the market in recent weeks.

Merrill Lynch, which has suffered heavy credit market write-downs, has agreed to be taken over by Bank of America.