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NEW YORK, LONDON - Billionaire investor George Soros has given warning that the US is on the brink of a slowdown far more serious than the Federal Reserve is expecting.

Mr Soros said during a lecture at the New York University this week that the American economy is "on the verge of a very serious economic correction" after decades of overspending.

His statements have caused disquiet among investors and central bankers, as Mr Soros made US$1 billion by betting against the Bank of England in 1992.

"I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing," he said.

"We have borrowed an awful lot of money and now the bill is coming to us and the war on terror has thrown America out of the rails."

Bleak warnings of more pain to come in the credit sphere snowballed on Tuesday and fears of subprime losses yet to be unearthed has rattled money markets.

Bank of England Governor Mervyn King said it would take months for banks to reveal their full losses stemming from risky mortgages and former Federal Reserve chief Alan Greenspan said the housing debacle was a major risk to the US economy.

Red ink flowed as IndyMac Bancorp, one of the largest independent US mortgage lenders, posted a third-quarter net loss of US$202.7 million due to mounting delinquencies and a collapse in investor demand to buy its home loans.

The loss was five times larger than it had projected, giving life to investor fears of more skeletons in the financial sector's closet. Emblematic of the market's mood, Goldman Sachs had to deny swirling rumors that it may need to write down mortgage-related losses.

International Monetary Fund chief economist Simon Johnson said financial market anxiety may have entered a second phase that could cause more credit tightening. Meanwhile, BoE's King reminded investors the banking sector had a long slog ahead.

"I think most people expect that we have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction," he said in an interview with the BBC.

As fears rise of more balance-sheet shock, economists worry that the deteriorating value of the mortgage debt and derivatives banks hold will choke off the traditional lending they do to the rest of the economy, dragging down growth.

Rising money market rates showed heightened concern among banks about the credit-worthiness of their counterparts.

London interbank offered rates for dollar deposits posted their biggest increase since late September.