Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee today the housing crisis coupled with rising oil prices are \u201cat the heart of the current (economic) uncertainty.\u201d Bernanke (pictured) predicted that the uncertainty would continue until problems in the housing market are stabilized. \u201cThe (housing market is) affecting consumer wealth and consumer expectations,\u201d Bernanke said this morning during his semiannual testimony before the Senate committee. \u201cMy suggestion in the near term would be to focus on issues related to housing. That\u2019s the most critical and central issue that we face.\u201d While Bernanke was giving his testimony, President George W. Bush was holding a White House news conference and trying to reassure Americans about the economy by saying that while there was slow growth in recent months, \u201cit was growth nonetheless.\u201d Bush spoke about legislation that could help Fannie Mae and Freddie Mac, the U.S.\u2019s two largest mortgage finance companies, both of which have seen their shares drop in recent days as investors worried that the two government-sponsored entities were being hit too hard from losses sustained in the mortgage meltdown. The president urged Congress to act on the proposed legislation, noting that the two mortgage companies play \u201ca central role\u201d in the housing market,\u201d according to a Bloomberg story by Roger Runningen and Catherine Dodge. CPN reported Monday that a temporary rescue plan has been put in place to help the GSEs, which own or guarantee about half of the country\u2019s $12 trillion mortgage market. A more comprehensive plan to help Fannie Mae and Freddie Mac would become part of a housing bill this week. Bloomberg quoted Bush as saying, “The first step is to make sure there is confidence and stability in the mortgage markets.” Those comments echoed remarks made repeatedly by Bernanke as he gave his prepared statement then took questions from the senators. \u201cThe best thing that we can do to remove this uncertainty and speed the recovery is to make sure that the housing market and the mortgage financial markets are functioning as smoothly as possible,\u201d Bernanke said. He also called for a \u201cworld-class regulator to be able to provide assurance to investors, and to the taxpayer. That\u2019s job one. Then we need to think about what else is needed to make sure they are strong enough financially.\u201d Bernanke said there should be some stabilization in the construction of new homes by the end of the year or early next year. But he predicted housing prices would continue to drop longer than that because of the large inventory. \u201cThere is uncertainty about exactly what the equilibrium is that prices will reach. It is that uncertainty that is generating a lot of the stress we are seeing in the financial markets.\u201d The Fed chairman expressed confidence that the housing market would eventually recover but he said expect to see tighter restrictions such as tougher underwriting standards, \u201cmore investor due diligence, probably less use of securitization or complicated securitized products.\u201d Bernanke, who at one point took heat from Sen. Tim Bunning, R-Ky., over the Fed\u2019s actions, defended the decision to help arrange JPMorganChase\u2019s acquisition of Bear Stearns. \u201cOur actions with respect to Bear Stearns, with respect to Fannie and Freddie and with respect to the financial system in general are based on our view that financial stability is critical to economic stability. I just don\u2019t accept the distinction between helping Wall Street and helping Main Street. The actions we\u2019ve taken are aimed at helping the overall economy.\u201d Bernanke, though, did note that he thinks the investment banks need more oversight. \u201cI have not proposed a particular agency to do that,\u201d he said. \u201cThe key issue is that they have strong consolidated supervision.\u201d Addressing questions about the failure of IndyMac over the weekend, Bernanke said it was the \u201csubprime and other exotic mortgages\u201d that led to the bank\u2019s collapse. He added that in general, \u201cour banking system is well-capitalized.\u201d Bernanke said the Fed is concerned more about banks\u2019 abilities to extend credit than about solvency. Asked whether the U.S. was in a technical recession, Bernanke noted that\u2019s a determination made by economists using technical definitions after the fact, such as employment and industrial production. But he said that whether or not we were in a technical recession, it is a serious situation and people are worried. \u201cThe combination of declining wealth, weak job market, rising food and energy prices, foreclosures, tight credit\u2026all those things are putting tremendous pressure on families and it explains why consumer sentiment is low.\u201d Bernanke was to appear later in the day before the same committee with Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox to discuss financial markets. Tomorrow, Bernanke is scheduled to testify before the House Financial Services Commission.<\/p>\n","protected":false},"excerpt":{"rendered":"
Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee today the housing crisis coupled with rising oil prices are \u201cat the heart of the current (economic) uncertainty.\u201d Bernanke (pictured) predicted that the uncertainty would continue until problems in the housing market are stabilized. \u201cThe (housing market is) affecting consumer wealth and consumer expectations,\u201d Bernanke…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1003827673","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n