Bernanke: Housing Woes to Slow Growth

A deepening housing slump probably will be a "significant drag" on economic growth into next year and it will take time for Wall Street to fully recover from a painful credit crisis, Federal Reserve Chairman Ben Bernanke warned Monday.

Bernanke once again pledged to "act as needed" to help financial markets -- which have suffered through several months of turbulence -- function smoothly and to keep the economy and inflation on an even keel.

"Conditions in financial markets have shown some improvement since the worst of the storm in mid-August, but a full recovery of market functioning is likely to take time, and we may well see some setbacks," Bernanke said in a speech to the New York Economic Club.

The ultimate implications of the credit crunch on the broader economy, however, remain "uncertain," the Fed chief said.

Since that September meeting, the housing slump -- the worst in 16 years -- has gotten deeper, Bernanke said.
"The further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year," he said.

Bernanke said the Fed will continue to monitor inflation developments carefully. "Part of the reason that we have some confidence in inflation remaining well controlled is we expect to see the economy growing more slowly at the end of this year" and early next year.

The Fed's next move will be determined by what is best for the economy, Bernanke suggested. As he has said previously, it is not the Fed's job to shield investors from the consequences of bad financial decisions.
"Developments over the past few months reinforce this point. Those who made bad investment decisions lost money."
The worst carnage has affected investors in "subprime" mortgages -- those made to people with spotty credit or low incomes. Some lenders have been forced out of business and some investors in those and related mortgage-backed securities have taken a huge financial hit. Foreclosures and late payments have soared.

Weaker home prices seen during the housing bust have made it more difficult for some subprime borrowers to refinance out of loans that offered low "teaser" rates but jumped to much higher rates, resulting in payment shocks. Delinquencies on these mortgages are expected to rise further, Bernanke predicted.


Tracking the Dow Movement on Monday 15/10/07

Another jittering day on the credit-crunch issues sent the Dow sliding from the opening bell before it starts to stabilise after 11:15am.Intermittent accumulation were noticed and towards the last one-hour of trading an advancing soldiers were sighted and aiming for the MAV.A possible spill-over of bulls for the next day trading.


It's a Bearish Engulfing candlestick!It did not close below the Bottom average.There is a possibility of a short covering. http://www.litwick.com/indicators/1210.html