Alan Greenspan, the former chairman of the US Federal Reserve, has described the crisis racking Wall Street as the worst he has seen.

In an interview on ABC News yesterday, Greenspan, who spent nearly 19 years at the top of the Fed, said it was probably a ‘once-in-a-century event’ and ‘we will see other major financial firms fail.’

Greenspan, who is against too much government interference in the economy, said that not all financial institutions should be saved. ‘We shouldn't try to protect every single institution. The ordinary course of financial change has winners and losers’, he said.

He added that the US stood a ‘less than 50%’ chance of escaping a recession.

Greenspan left office in January 2006, but his influence has remained strong.

After 24 hours that has seen the collapse of Lehman Brothers, a restructuring of insurer American International Group (AIG) and a deal that saw Merrill Lynch sell up to Bank of America, all eyes will be on the US stockmarket, particularly the financials, when it opens this afternoon.

In London, the FTSE 100 was hovering around 4% lower just after 11am.