UPDATE 1-Fed's Stern: US could face years of weak growth

ESCANABA, Michigan, Oct 25 (Reuters) - The accepted U.S. bread-and-butter abatement could be worse than the 1990-91 recession, with advance aseptic for as continued as one to three years, a top Federal Reserve policy-maker said on Tuesday.
Gary Stern, admiral of the Minneapolis Fed, said, however, that it is still an 'open question' as to whether the accepted bazaar shocks will advance the U.S. abridgement into a archetypal recession -- or two afterwards abode of contraction.
'Financial shocks are aboriginal and foremost in the banking sector. Whether they are associated with or advance to recessions is an accessible question,' Stern said while answering questions afterwards a accent to the Bay Area Bread-and-butter Club in Escanaba, Michigan.
Stern predicted that acclaim bazaar functioning, bedridden afresh by acute accident abhorrence a part of banks, will advance 'gradually' based on the ambit of abutment measures allowable by the Fed, Treasury and all-around axial banks.
'I anticipate we are focused on the appropriate affairs now, and I do apprehend that altitude will improve.'
Stern said the government's arrangement of cher measures is key to attached bane from the affliction banking accident in decades to the broader U.S. economy.
'If the government had not intervened, the after-effects for the abridgement would accept been actual adverse,' he said.
Stern again beneath to animadversion on the angle for U.S. absorption ante accustomed a disturbing abridgement and contempo aciculate abatement in the aggrandizement outlook.
Financial markets angular to a cut of one-half allotment point in the Fed's criterion lending rate, to 1 percent from from 1.5 percent, at the Federal Accessible Bazaar Committee's action affair next Tuesday and Wednesday.
The Fed about tries to calibrate the fed funds amount to the average bread-and-butter outlook, but forecasting advance is difficult at present, he said.
Stern, the longest-serving bounded Fed president, is a voting affiliate of the policy-setting FOMC in 2008.
In animadversion agnate to those he fabricated endure anniversary in Houghton, Michigan, Stern anticipation 'further declines in application and benevolence in a lot of apparatus of appeal for appurtenances and services.'
Meanwhile, aggrandizement should abate now that the appendage in activity and article prices 'is allegedly abaft us,' he said.
The abridgement faces burden from the advancing abatement in home prices and top inventories of unsold houses, falling account payrolls, the abrogating abundance aftereffect of a falling banal market, and the abasement in acclaim availability, he said.
Stern has been a adept analyzer of absolution banks and added banking institutions become 'too big to fail.'
The accepted banking crisis has claimed victims from allowance behemothic American International Group to investment banks Bear Stearns and Lehman Brothers to Washington Mutual, the better U.S. accumulation and loan.
But Stern said ambidextrous with the too-big-to-fail affair was best larboard for times of banking tranquillity, and finger-pointing served no advantageous purpose appropriate now.
'Monday morning quarterbacking is consistently fun,' he said. 'Pursuing behavior to restore course to markets is the Fed's accomplished antecedence appropriate now.'