Gerry...... Where did you the figure of US$ 600 mill.
Try at least $US100 billion
"Injection of capital will be an ongoing thing and I support it, there being no alternative. A pity that the ordinary subprime mortgage holder will miss out when in trouble. Hepling out the latter could easily cost say US$600 mill over time. Many COD's are held by foreigners as well."
Subprime losses could hit $114b
July 21, 2007
FEDERAL Reserve chairman Ben Bernanke has told a parliamentary committee that subprime mortgage losses could hit $US100 billion ($114 billion) and threaten consumer spending, but he sought to reassure the senators that the central bank was working quickly to strengthen lending regulations.
"The credit losses associated with subprime have come to light and they are fairly significant," Dr Bernanke told the Senate Banking Committee on Thursday, his second day of testimony on the Fed's twice-yearly economic report.
"Some estimates are in the order of between $US50 billion and $US100 billion of losses associated with subprime credit problems," he said, referring to a segment of the mortgage market that caters to borrowers with shaky credit.
Dr Bernanke said that the most reliable indicators showed US home prices had not declined nationally and that the housing slump had so far not led US consumers to cut back on spending.
He said, however, that if prices did drop, consumers might trim spending by as much as US9c for each dollar of wealth lost.
As a result of the weaker-than-expected housing sector, the Fed has lowered its growth forecasts for this year and next, but the US central bank believes the drag should ease over time.
Dr Bernanke outlined steps the Fed had taken or planned to take to ensure that the subprime problems did not recur, but sharp questions from members of the committee showed some lawmakers think the Fed is not acting swiftly enough as foreclosure rates soar. He testified that the central bank was progressing as fast as it responsibly could.
In testimony before members of the House of Representatives on Wednesday, Dr Bernanke had said that licensing mortgage brokers could be a good idea and he promised to institute new rules on mortgage loans within six months.
The Fed chief also faced pointed questioning over China's currency policy as congressmen argue that China keeps the value of its yuan currency artificially low to gain an edge for its producers in international markets.
China this week reported heady growth for the second quarter, with gross domestic product increasing at an annual pace of 11.9 per cent.
The committee's chairman, Democratic senator Christopher Dodd of Connecticut, said the panel planned to vote on a bill that could push the US Treasury to declare China a currency manipulator before lawmakers left Washington for an August recess.
Dr Bernanke said he shared the frustration over China's slow progress in allowing the yuan to appreciate, but added that exchange rates alone would not solve an imbalance that had seen the US trade gap with China balloon to new record highs.
The weak currency distorted China's economy in favour of exports, Dr Bernanke said, but he added that the yuan regime was not a "subsidy" in the legal sense of the word.
Last December, Dr Bernanke caused a stir when he wrote in a speech that the undervalued yuan provided an effective subsidy to Chinese exporters. He stood by that statement under questioning from Congress in February.
Reuters
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