Bernanke Blasts Housing Regulation

Federal Reserve Chairman, Ben Bernake

According to the Federal Reserve Chairman, Ben Bernake, impediments to mortgage lending are actually holding back the central bank’s efforts to bolster economic growth. Moreover, he is criticizing the speed in which the housing market is being repaired, calling for further action.

“We have helped lower mortgage rates to the lowest point in many, many decades,” Bernanke told homebuilders today in Orlando, Florida. “Yet we are not seeing as much activity as we would like to see.”

Bernanke, who repeated that the pace of the recovery has been “frustratingly slow,” didn’t discuss the outlook for monetary policy. He devoted part of his speech to recommendations from a Fed study on housing that was sent to Congress last month and which prompted criticism from some lawmakers, who said the Fed has overstepped its authority.

Housing Assessment

“The state of housing and mortgage markets may also be holding back the recovery of our financial system and the normalization of credit conditions,” Bernanke said today to the National Association of Homebuilders International Builders’ Show. The Fed Chair states that conditions are still too tight for the health of both the financial system, for the construction industry and for our economy. ”

Slowing  Sales

Existing home sales climbed to a 4.61 million annual pace in December, up from 3.3 million in July 2010, the worst month on record, according to the National Association of Realtors.

“Properties may be rehabilitated as rental or owner- occupied housing or, in extreme cases, demolished,” Bernanke said today. “Only some states have passed legislation to establish land banks, and most existing land banks lack the resources to keep pace with the number of low-value properties in the current inventory.”

Historic Settlement

Bernanke’s remarks followed the announcement yesterday that Bank of America Corp., JP Morgain Chase & Co. and three other U.S. banks reached a $25 billion settlement with 49 states and the U.S. government to end a probe of abusive foreclosure practices prompted by the collapse of the housing price bubble.

The U.S. Justice Department, Department of Housing and Urban Development and state attorneys general announced the agreement yesterday, which was more than 16 months in the making following a move by states to investigate bank foreclosure practices in 2010.

U.S. Attorney General Eric Holder called the agreement — which also included Wells Fargo & Co., Citigroup Inc. and Ally Financial, Inc. — the largest federal-state civil settlement in U.S. history.

The Standard & Poor’s 500 Homebuilding Index has increased 23 percent this year. (Bloomberg)

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