Former General Electric Co Chairman and CEO Jack Welch "I now believe we are in for one hell of a deep downturn,"

Jack Welch says U.S. faces "deep downturn"

NEW YORK (Reuters) - Former General Electric Co (GE.N) Chairman and Chief Executive Officer Jack Welch said the U.S. economy faces a deep downturn in coming quarters, and he supports a proposed $700 billion government rescue package for the financial sector.

"I now believe we are in for one hell of a deep downturn," Welch told the World Business Forum in New York on Wednesday, adding that the first quarter of 2009 will likely be "brutal."

Until recently, Welch said, he had believed the U.S. economy could avoid recession, but he has changed his mind.

"I am now caving," he said. "Get ready for real tough times. They're coming. There is no credit available."

Welch said mortgage lenders, legislators, investment bankers and others are all to blame for the crisis, which stemmed from easy credit and investors' appetite for yield.

"The problem was money didn't cost anything," Welch said. "People took swings."

He likened the crisis to Agatha Christie's "Murder on the Orient Express," in which all the suspects turn out to be guilty; but he singled out the role of investment banks in the crisis.

"We have to look at the damn investment bankers," he said. "They're playing with other people's money. The only penalty was a cut in their bonus, not their head."

Welch praised the actions taken so far by Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and New York Fed President Timothy Geithner, calling them "brilliant public servants" who have "not let ideology get in the way of taking action."