Ben Bernanke is a Little More Candid About the Housing Market
At least the extent of the damage in the housing market is beginning to come out, from Market Watch.
Federal Reserve Chairman Ben Bernanke said Thursday that there will be "significant losses" associated with subprime mortgages but that these losses should be regarded as "bumps" along the road of market innovation.
Bernanke's second day of testimony before Congress on the state of the nation's economy and the outlook for U.S. monetary policy was dominated by concern about the subprime-mortgage sector.
Bernanke said these were "market innovations" and "sometimes there are bumps" in the new-product road.
"We'll see how this works out," Bernanke said.
The Fed chief repeated that the problems in the subprime-mortgage market haven't caused a systemwide credit crunch.
In addition, Bernanke told members of the Senate Banking Committee that the pain and suffering felt from foreclosures and delinquencies will "likely get worse before they get better."
Bernanke, under fire from lawmakers for the Fed's failure to step in earlier to address the factors underlying the nation's housing bubble, said the Fed and other regulators will soon issue stronger rules to protect consumers.
Bernanke said there were going to be "significant losses" in subprime-mortgage paper, citing estimates ranging from $50 billion to $100 billion. (my emphasis)