Housing not yet out of the woods: Bernanke
By Karen Jacobs
ATLANTA (Reuters) - The improving housing market is "far from being out of the woods," Federal Reserve Chairman Ben Bernanke said on Thursday, arguing that overly tight lending standards are part of the problem.
The Fed, which has focused on mortgage bonds in its latest round of asset purchases, will continue to do what it can to support the housing market, Bernanke said in a speech that avoided policy specifics.
A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis and brutal recession that continues to hamper the world economy. Data in recent months, however, have shown the sector is on the mend.
"Although there are good reasons to be encouraged by the recent direction of the housing market, we should not be satisfied with the progress we have seen so far," Bernanke told the Operation HOPE Global Financial Dignity Summit.
The Fed chairman noted that tighter credit standards were an appropriate response to the peak in house prices and the crisis the followed.
"However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery," Bernanke said.
Earlier this year, the Fed had suggested other policymakers in Washington consider steps to free up credit and lift the housing sector. Critics on Capitol Hill, however, charged that the central bank should stick to formulating monetary policy.
In his speech on Thursday, Bernanke steered clear of offering any policy prescriptions as he detailed steps officials have already undertaken. Continued...