June 24 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the credit seizure that has roiled the securities industry since August may persist into next year even as the Fed has reduced the instability of financial markets.

``Things do at this particular stage look a little better. But I would caution that we have seen false starts before,'' Greenspan said via satellite today to a conference sponsored by 702 Talk Radio in Johannesburg. Still, ``this crisis I fear is going to be with us for a while,'' either for a ``good number of months or into next year,'' he said.

Greenspan's successor, Chairman Ben S. Bernanke, today convenes a two-day meeting of the Federal Open Market Committee, which economists expect will leave the benchmark interest rate unchanged at 2 percent after seven cuts since September. Fed officials are trying to revive economic growth as inflationary pressure rises because of surging commodity prices.

``Data suggests we are on the brink'' of a recession in the U.S., Greenspan said. The next year will be ``a very sluggish period,'' with a ``highly volatile oil market.''

Greenspan, who served as U.S. central bank chief from 1987 to 2006, said earlier this month that financial markets have shown a ``pronounced turnaround'' since March. That's when the Fed rescued Bear Stearns Cos. from bankruptcy and opened lending to investment banks.

In general, governments and central banks can't just ``guarantee liabilities without consequences,'' Greenspan said. ``You have to make it a very special case. Otherwise you create distortions.''

`Severe Recession'

The actions in March have reduced the threat of a ``severe recession,'' he said. Yet an economic rebound in the U.S. ``isn't in the immediate outlook,'' he said.

The Fed this year has cut the benchmark interest rate at the fastest pace in two decades to sustain economic growth and avert a financial-market meltdown following the collapse of the subprime mortgage market.

The U.S. is dealing with ``the most complex'' financial crisis in more than five decades, Greenspan said.

U.S. home prices may decline a total of 25 percent from their peak, he said. ``It's conceivable we can go more than that if the crisis is prolonged,'' he said.

A private survey released today showed that home prices in 20 U.S. metropolitan areas fell in April by 15.3 percent from a year earlier, the most on record for the S&P/Case-Shiller home- price index. Separately, consumer confidence dropped more than forecast to the lowest in more than 16 years, according to the Conference Board.

Some market interest rates reflect a ``large insolvency fear'' among investors, suggesting that there are still ``considerable structural problems that exist in the financial system'' and may extend ``for a while,'' Greenspan said.

To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net.

Last Updated: June 24, 2008 12:06 EDT