United States Federal Reserve Chairperson Ben Bernanke told Congress on Thursday that the credit crisis has created ”significant market stress” and offered fresh assurances that regulators will take steps to curb fallout related to the mortgage mess.
Bernake made the statement in testimony prepared for a hearing on Thursday before the House financial services committee. It came just two days after the Federal Reserve sliced a key interest rate by a bold half-percentage point to prevent the weight of housing and credit problems from sinking the economy.
It was the first time in more than four years the Fed cut this rate.
”Global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans,” the Fed chairperson said.
The meltdown in the housing and mortgage markets has shaken Wall Street and Main Street.
Treasury Secretary Henry Paulson, also scheduled to appear at the hearing, signalled that the administration will consider allowing the big mortgage companies Fannie Mae and Freddie Mac temporarily to buy, bundle and sell as securities any loans exceeding $417 000.
The idea, which represents a policy change for the administration, is portrayed as a way to inject liquidity into the stretched mortgage market.
Paulson said the change involving jumbo loans can occur only in tandem with tighter oversight of the two government-sponsored mortgage companies, according to a person familiar with the remarks the secretary prepared for the hearing. — Sapa-AP