April 8 (Bloomberg) -- Morgan Stanley Chief Executive Officer John Mack said the credit crisis will last ``a couple of quarters'' longer as it spreads to commercial real estate, subprime mortgages in Europe and U.S. midsized banks.

The collapse of the subprime market in the U.S. has reached its eighth inning or ``maybe top of the ninth,'' Mack said today before the company's annual meeting, referring to the final period of a baseball game. Europe is in the sixth inning and the market for securities backed by commercial mortgages is ``probably in the fifth,'' he said.

The world's biggest banks and brokerages have reported more than $230 billion of losses and writedowns since the start of last year because of the credit contraction. Total losses for banks, hedge funds, insurance companies, pension funds and government-sponsored agencies may reach $945 billion, the International Monetary Fund said in a report today.

``It's going to be a difficult year for the Street,'' Mack, 63, said at the meeting in Purchase, New York. Mack was re- elected to the board with about 95 percent of shareholder votes, the company said. Each of the other directors received more than 90 percent.

Mack told shareholders the markets are facing the most difficult conditions he's seen in 40 years. Morgan Stanley, the second-biggest U.S. securities firm, is only ``gingerly'' investing in distressed assets while preserving cash to weather the downturn, he said.

Less Leverage

While he sees opportunities to invest in the leveraged loan market and in mortgages ``at some point,'' Mack said he wants the firm ``to stay very liquid for a period of time'' after ``we saw a run on the bank'' at Bear Stearns Cos. and ``an attempted run'' on Lehman Brothers Holdings Inc. in recent weeks.

Morgan Stanley estimated in a report earlier this month that turmoil in the credit markets may last an additional five to seven quarters, exceeding the duration of the Asia currency crisis and fallout from the bursting of the dot-com bubble.

The firm has reduced its leverage, a measure of reliance on debt, as most of Wall Street's largest firms sell assets, raise additional capital and hoard cash to grapple with unprecedented losses. Colm Kelleher, Morgan Stanley's CFO, said on March 19 that the bank cut its adjusted leverage ratio to 16 at the end of February, from 17.6 at the end of November.

Former Federal Reserve Chairman Alan Greenspan, speaking in Tokyo today, said the drop in U.S. home prices will probably end ``well before'' early next year as the number of houses on the market diminishes, aiding an economic rebound.

Votes Withheld

``It will not be until early 2009 that we will get close to having eliminated most of this'' home inventory, Greenspan said at a conference sponsored by Deutsche Bank AG and co-hosted by Bloomberg LP. ``But it is very likely that home prices will stabilize well before that.''

Greenspan added that the extent of damage stemming from the collapse of the subprime-mortgage market won't be known for months. He described the credit crisis as the worst in 50 years.

Mack and the rest of the Morgan Stanley board won re- election over the objections of pension funds including the California State Teachers' Retirement System, which said last week it withheld its votes for several board members, including Mack. CalSTRS, as the fund is known, said shares of the company have underperformed the market and the company's biggest competitors.

No Say on Pay

Wrong-way bets on subprime mortgage-related securities led last year to Morgan Stanley's first quarterly loss as a publicly traded company. The firm was forced to raise $5 billion in capital by selling convertible securities to China Investment Corp., the state-owned investment fund. Morgan Stanley dropped 21 percent in 2007 on the New York Stock Exchange and is down 10 percent this year.

The company's investors today rejected a proposal from the American Federation of State, County and Municipal Employees to give shareholders a non-binding advisory vote on executive compensation. About 36.8 percent of shareholders voted for the so-called Say on Pay proposal, down from 37.2 percent last year.

``Institutional investors are slowly coming around to the concept,'' John Keenan, AFSCME's strategic analyst for corporate governance and investment policy, said in a Bloomberg Television interview today. The vote was a ``strong showing,'' Keenan said.

Morgan Stanley fell 47 cents, or 1 percent, to $47.62 in 4:10 p.m. composite trading.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: April 8, 2008 16:14 EDT