Fed Chairman Ben Bernanke's Push for More Federal Reserve Power

Tag : tinplate strip
Fed Chairman Ben Bernanke's Push for More Federal Reserve Power Tuesday, July 08, 2008
SUSIE GHARIB: Ben Bernanke said today he wants Congress to give theFederal Reserve more power. Speaking at a mortgage lendingconference in Washington, the Fed chairman said the U.S. financialmarkets need to be more resilient and stable. He proposed givingthe central bank a bigger role in supervising the nation'sinvestment firms. Bernanke also wants the government to create anew system to ensure that financial firms can fail without damagingthe entire economy. And he said the Fed may extend its emergencyloan program for Wall Street firms into next year. Well, at thatsame conference today, regulators also outlined new ways to fix thesubprime mortgage mess. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The FDICbrought together a who's who of financial market leaders. The goal-- encourage lenders to make affordable mortgages to low-incomeborrowers now that the subprime market has imploded. FDIC ChairmanSheila Bair says the first step is restoring confidence in themortgage market.
SHEILA BAIR, CHAIRMAN, FDIC: We need to bring the privateinvestment community back in to support funding for mortgages forlow and moderate income people. We need to make sure that lendingis done the right way, it's done responsibly, it's affordable, it'ssustainable, it helps people accumulate wealth, not strip wealth.
DHUE: Next week, the Federal Reserve will release new rulesgoverning future subprime loans that could require lenders to besure borrowers can repay the loans; hidden fees be disclosed; andescrow amounts for taxes and insurance payments be withheld. FedChairman Ben Bernanke says the new rules will apply to all lenders.
BEN BERNANKE, CHAIRMAN, FEDERAL RESERVE: These new rules willaddress some of the problems that have surfaced in recent years inmortgage lending, especially for high-cost mortgage lending.
DHUE: As for the next generation of subprime loans, otherregulators would like to see an end to 100 percent financed loans;an emphasis on fixed-rate loans; and the use of 40-year mortgagesto lower monthly payments without the payment shock of adjustableloans. The market has gone back to basic lending practices,requiring 20 percent downpayments and fully documented loans.JPMorgan Chase CEO Jamie Dimon says it will take some time forlenders and investors to take on more risk.
JAMIE DIMON, CHAIRMAN & CEO, JPMORGAN CHASE: When they say a catwho sits on a hot tin plate will never sit on a hot tin plateagain, but it also won't sit on a cold tin plate. And that's theproblem we have. People have been really badly burned.
DHUE: Many home buyers are also feeling burned. Affordable housingadvocate Martin Eakes expects it to be another year or two beforehome prices stabilize.
MARTIN EAKES, CEO, CENTER FOR RESPONSIBLE LENDING: So, for me,right now, I advise many aspiring homeowners to wait a year, savetheir money, rent. But don't jump in when your entire life savingscould be wiped out by just the natural force of the marketplace.
DHUE: What's unknown is how far home prices will fall and how badthe economy will get. That's likely to keep many buyers andinvestors on the sidelines for now. Stephanie Dhue, NIGHTLYBUSINESS REPORT, Washington.