By James Saft

DAVOS, Switzerland (Reuters) - Like a banker walking the snowy streets of Davos in his dress shoes, the U.S. Federal Reserve may find it has a problem: traction.

The Fed's emergency rate cuts will help, but their very nature shows the extent of the challenge and the limited efficiency of the apparatus available to tackle it.

The U.S. central bank took the extraordinary step of cutting rates by 75 basis points to 3.5 percent, just a week before its regularly scheduled meeting.

But given the nature of the crisis -- a deflating debt bubble centred on real estate -- monetary policy will be slow to work and less effective than in most previous slowdowns.

In fact, the panicky impression given by the cuts, and the fact the market is already betting on another half a percentage point next week, tells the story of exactly how limited the Fed's options are.

"There is a good chance they are pushing on much more of a string than they think," Stephen Roach, Morgan Stanley Asia chairman, told Reuters at the Davos summit of economic and business leaders.

"We have two factors that triggered this recession, a decline in housing prices and the bursting of the credit bubble. Aggressive Fed action will not fix the impact of supply and demand which is pushing housing prices lower, and it's not going to return credit markets to their pre-crisis function."

Stock markets rallied after the Fed's move, the largest cut in rates in many years and the equivalent of taking rates down by a fat 18 percent.