By John Rebchook, Rocky Mountain News

A massive federal bailout may be needed to pull the country out of a U.S. credit crisis that is the worst since the Great Depression, according to a Boulder lender with a national reputation.

“We’re running out of time,” said Lou Barnes, principal of Boulder West Financial Services.

One possibility, he said, would be a hybrid of the government’s bailout of Chrysler in 1979, or the savings and loan bailout a decade later, when Congress created the Resolution Trust Corp. to take over the assets of failed S&Ls, such as Silverado Savings and Loan in Denver.

Barnes said the nation could be facing a “credit spiral” for the first time since the 1930s.

That’s when an overextended market is hammered by loan defaults, causing underwriting to tighten, he said. That leads to even more defaults and more tightening, feeding on itself.

By Elena Moya Reuters

Published: January 18, 2008

LONDON: Banks will continue to suffer into 2009 as turmoil in the credit markets drags on, credit ratings agency Standard & Poor's said on Friday.

The structured finance market -- which packages loans and bonds to be re-sold in chunks across the investment community and which has been a key source of funding for many banks -- may take longer than that to return, S&P said in a report.

"The structured finance market has been significantly affected and it may take years for the market to return," the report said.

Banks, including UBS AG , have announced a combined $90 billion (46 billion pounds) in write-downs of leveraged loans, sub-prime securities and collateralised debt obligations (CDOs), S&P said.

Switzerland-based UBS said on Friday it was shrinking its investment banking business, cutting staff and drastically downsizing risk exposure.