Fed Chair Warns Congress of Economic Slowdown, Continuing Mortgage Crisis

Federal Reserve Chairman Ben Bernanke isn’t feeling too optimistic about the economy these days, according to NPR. He warned Congress today of an coming economic slowdown tied to the subprime meltdown, the surge in energy prices, and oh yeah, did we mention the subprime meltdown?

“Delinquencies on these mortgages are likely to rise further in coming quarters as a sizable number of recent-vintage subprime loans experience their first interest rate resets,” Bernanke testified.

“Weakness in the housing market will keep construction in a down trend,” he said.

He also had some advice for those of you in mortgage meltdown land: “Get in touch with your lender because experience shows the earlier you do so you’ll be able to resolve the matter.”

Retailers should worry, too: “Indicators of overall consumer sentiment suggested that household spending would grow more slowly, a reading consistent with the expected effects of higher energy prices, tighter credit and continuing weakness in housing,” Bernanke said.

He’s a cheerful guy, isn’t he? We like that about him. Maybe he didn’t hear that everything is going to be ok because broke people shop at Walmart.

Fed Chair Warns Congress of Economic Slowdown [NPR]

Comments

Edit Your Comment

  1. Benstein says:

    Crappy news, but I LOL’d at the pic.

  2. starrion says:

    LOLFed?

  3. theblackdog says:

    Broke people shop at Wal-Mart eh? Apparently sales are down at Wal-Mart, but they’re slightly up at Sam’s Club. Costco’s sales are even higher.

    [www.wtop.com]

  4. RichAndFoolish says:

    What a load of cr*p.

    Notice how he doesn’t mention the huge role the fed plays — printing too much “monopoly money”.

    Nor does he tell how congress has driven huge sectors of the US economy overseas.

  5. t206 says:

    The only worthwhile part of the conversation was when they let Ron Paul question Bernake. Paul stands up for the average person, and isnt bought into all of the big business and wealthy bankers who try to con the average consumer/home owner.

    Here is a link to Ron Paul questioning the real issues
    [www.youtube.com]

    P.S. if you dont already know, Ron Paul is running for president too. :) [www.ronpaul2008.com]

  6. gibbersome says:

    Hey kids! It’s time for a history lesson!

    Mayer Amschel Rothschild fortunes changed after the turn of the nineteenth century and the invasion of Germany by Napoleon’s army.
    His scam involved the Battle of Waterloo.
    With Wellington about to engage Napoleon, Rothschild, on information from his agents, knew that Napoleon was about to be defeated, but spread word throughout London that Napoleon appeared to be on his way to victory.
    Rothschild then sold his holdings in the English stock market, starting a panic. After the market crashed, Rothschild agents began buying up the devalued stocks and when official word finally reached England that Napoleon had indeed been beaten by Wellington, stocks soared, giving Rothschild control over the British economy.

  7. You should read the latest report from the Brookings Institute here: [www.brookings.edu]

    Basically, it shows there is more hype to the mortgage crisis than reality.

    “The facts hardly indicate a credit crisis. As of mid-2007, data show that prices of existing homes are not collapsing. Despite large declines in new home production and existing home sales, home prices are only slightly falling overall but are still rising in many markets. Default rates are rising on subprime mortgages, but these mortgages — which offer loans to borrowers with poor credit at higher interest rates — form a relatively small part of all mortgage originations. About 87 percent of residential mortgages are not subprime loans. Subprime delinquency rates will most likely rise more in 2008 as mortgages are reset to higher levels as interest-only periods end or adjustable rates are driven upward. Unless the U.S. economy dips dramatically, however, the vast majority of subprime mortgages will be paid. And, because there is no basic shortage of money, investors still have a tremendous amount of financial capital they must put to work somewhere. On the immediate problem of mortgage defaults, some aid to the subprime borrowers might be justified, but bailing out the lenders even more than we have up to now would create a moral hazard by merely encouraging them to do it again.”

  8. mac-phisto says:

    @RichAndFoolish: silly, we stopped printing money years ago! all that’s been outsourced to the koreans –> [stickynotes.squarespace.com]

  9. Bearish says:

    Bernanke really neglects to discuss how a devalued dollar could play into the economic outlook. Foreigners are ditching their dollar reserves faster than yuppies with lead toys. This could be good in that US products will be cheaper to buy, and help fix our miserable trade imbalance.

    Fun things to watch out for:

    China using their “nuclear option” and moving most of their reserves out of dollars.
    [www.telegraph.co.uk]

    Even more countries abandoning the dollar
    [www.vheadline.com]

  10. mac-phisto says:

    @Bearish: they’re just saber-rattling in response to sentiments of slowing or halting u.s. entry of chinese goods. the yuan is still pegged against the dollar with only a slight margin for float. a cash dump would screw their economy as much (if not more) than ours.

    furthermore, dumping cash reserves at a time when the dollar is at a historic low benefits us more than them. a mass sell-off could induce problems, but even as weak as the dollar is, it is a good investment. a sell-off could allow a more diverse crowd of investors to relieve their portfolios of overvalued currencies *cough* gbp, euro *cough* & snatch up dollars at bargain-basement prices.

    personally, i think this is just a payout for the rangers (again). investments priced in dollars are skyrocketing as foreigners take advantage of the discount (read: oil). but that’s just my political leanings getting the best of me.