| Intel | |
 | |
| Citigroup | |
 | |
Bernanke: Stop The Bleeding
Carl Gutierrez, 03.04.08, 3:35 PM ET
Federal Reserve Chairman Ben Bernanke called on the government and industry to essentially stop the bleeding that has driven the country's economic doldrums.
Bernanke in his speech called for more action to prevent housing foreclosures. "This situation calls for a vigorous response," Bernanke said to a banking group. The Florida setting was appropriate, given the high rate of mortgage defaults in that state. The chairman said that, despite relief efforts currently being undertaken by the industry and government, foreclosures and late payments on home mortgages are likely to rise "for a while longer".
Rising foreclosures threaten to worsen the problems of the housing market and the national economy, which many fear is on the verge of a recession or in one already.
"Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods and the nation as a whole," Bernanke said. "Although lenders and services have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should, be done," the Fed chief said.
As has become customary on Wall Street, U.S. stocks dropped in response to Bernanke's comments, despite his having said nothing new or even particularly pessimistic. Perhaps investors are thinking "rising foreclosures" become real only when he talks about them.
In any case, stocks were also pressured by bad news concerning Citigroup (nyse: C - news - people ) and Intel (nasdaq: INTC - news - people ). (See: "U.S. Stocks Near Lows At Midday") News reports say Merrill Lynch (nyse: MER - news - people ) has reduced its full-year earnings forecast for Citigroup and that the bank could book another write-down of debt tied to souring mortgages.
Shares of Citigroup were down 6.1%, or $1.41, to $21.88, in afternoon trading. Elsewhere on Wall Street, shares of JPMorgan Chase were down 3.4%, or $1.36, to $38.46, while Bank of America dropped 2.7%, or $1.05, to $38.13, and Wachovia fell 4.1%, or $1.26, to $29.15.
In addition to Bernanke's comments Fed Vice-Chairman Donald Kohn also said that banks are likely to face more loan delinquencies and asset write-downs in the coming months. Nonetheless, he added that banks will be able to weather this storm.
He predicted more asset write-downs at large bank holding companies, but did not make a specific prediction. Though in a mixed message that's become characteristic of Bernanke's tenure, Kohn did not predict a wave of new bank failures, something Ben Bernanke had last week.
No comments:
Post a Comment