Friday, November 16, 2012

Conditions Are Tight

Said Bernanke: "By now it is evident
That tight mortgage standards are prevalent,
Which is really too bad,
As it's time that we had
An impetus, not an impediment."

Federal Reserve Chairman Ben Bernanke gave a speech at a housing conference yesterday in which he noted the tight lending conditions currently prevailing in the mortgage market. Although loose lending standards contributed to the 2008 economic collapse, and tightening standards in response was appropriate, Bernanke said it appears that “the pendulum has swung too far the other way,” denying some creditworthy borrowers. This may slow the housing revival and impede the economic recovery, warned the Chairman.

That mortgage lenders remain reluctant to lend puts a spotlight on the limitations of Fed action, inasmuch as the central bank has recently begun a program to buy $40 billion a month of mortgage-backed securities as a way of freeing up the market's credit capacity. Chairman Bernanke spoke in Atlanta at the Operation HOPE Global Financial Dignity Summit. His remarks did not address the question of whether "financial dignity" is an oxymoron.

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