Economy: Bernanke Stresses Seriousness of Housing Contraction
Last week, Fed Chairman Ben Bernanke testified before the Congress’ Joint Economic Committee on “The Economic Outlook.” Bernanke said that the near-term economic outlook has weakened, relative to projections released by the Federal Open Market Committee (FOMC) at the end of January. He conceded that financial markets remain under considerable stress despite recent Fed actions to inject liquidity and stabilize the situation.
Bernanke stressed that the housing contraction is the biggest issue facing the economy and the financial markets, and he added that the timing of the housing market recovery will largely determine the timing of the pickup in overall economic activity.
The importance of Congress taking steps to support new lending and home buying as well as to help limit preventable foreclosures on outstanding mortgages was emphasized. On the latter front, Bernake has supported write-downs of underwater mortgages by investors/servicers and the use of FHA to insure replacement mortgages.
For the full story in Eye on the Economy view this page.
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