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HIGHLIGHTS-Bernanke's testimony on economic outlook
10/20 10:20 AM
(Updates with quote on Fannie Mae (FNM:$0.9698,$0.0198,2.08%) and Freddie Mac (FRE:$1.09,00$-0.0600,-5.22%) )
WASHINGTON, Oct 20 (Reuters) - U.S. Federal Reserve
Chairman Ben Bernanke testified on the economy's outlook and
financial markets to the House Budget Committee on Monday.
Following are highlights from his prepared testimony and
the question and answer session. For the text of Bernanke's
prepared testimony, see [ID:nN20511434]
From question and answer session:
HOW FANNIE MAE AND FREDDIE MAC COULD HELP MORTGAGE MARKETS:
"In particular, Fannie and Freddie, the stabilization of
those two companies, I think despite some run-up in mortgage
rates last week, I do think will provide more credit, more
available credit for homeowners going forward. Congress of
course has just passed the Hope for Homeowners bill which
allows troubled mortgages to be written down in terms of
principal and renegotiated and refinanced into the Federal
Housing Administration. Further steps could be taken along
those lines, if the Congress wished to. The Congress could also
further support Fannie and Freddie's funding and address some
of the costs that they face in order to make more credit
available to the mortgage market."
From prepared testimony:
ON THE FINANCIAL RESCUE LEGISLATION
"I am confident that these initiatives, together with other
actions by the Treasury, the Federal Reserve, and other
regulators, will help restore trust in our financial system and
allow the resumption of more-normal flows of credit to
households and firms.
ECONOMIC OUTLOOK
"The stabilization of the financial system, though an
essential first step, will not quickly eliminate the challenges
still faced by the broader economy. ... The pace of economic
activity is likely to be below that of its longer-run potential
for several quarters."
INFLATION OUTLOOK
The effects of surging commodity prices on consumer costs
"are now reversing in the wake of the substantial declines in
commodity prices since the summer. Moreover, the prices of
imports now appear to be decelerating, and consumer surveys and
yields on inflation-indexed Treasury securities suggest that
expected inflation has held steady or eased. If not reversed,
these developments, together with the likelihood that economic
activity will fall short of potential for a time, should bring
inflation down to levels consistent with price stability."