Ben Bernanke gives warning that financial markets =91far from normal=92.
Ben Bernanke, the chairman of the US Federal Reserve, gave warning
yesterday that financial market conditions were =93far from normal=94 and
cautioned that even the most rigorous regulation would not prevent a
repeat of the liquidity crisis endured during the past year.
Speaking via satellite to a financial markets conference yesterday,
the central banker also sought to reassure Wall Street that the Fed
was prepared to increase the amount lent to commercial banks to ensure
that liquidity did not dry up.
Mr Bernanke urged banks and fund management groups to raise new
capital to act as a cash cu****on during turbulent times and improve
their risk management procedures. He noted, however, that =93this
process is likely to take some time=94.
Adding to the gloom, new data showed that the property recession was
worsening as American house prices plunged at their fastest rate for
26 years during the first quarter of the year.
The average price of an existing single family home across the United
States fell by 7.7 per cent during the first three months of the year,
compared with the same period the year before, leaving the average US
house valued at $196,300 (=A3101,000).
According to the National Association of Realtors (NAR), sales
activity also collapsed. Over the same period, total existing sales
fell by 22.2 per cent as buyers stayed away from the falling market
for fear that prices would slide farther.
Of the 149 metropolitan areas surveyed by the association, 100 showed
declines in house price in the first quarter.
Lawrence Yun, the chief economist of the NAR, said in a statement:
=93These are highly unusual results because there were very few jumbo
loan originations [big mortgages] in the latest quarter, so sales are
much slower in high-cost areas.
=93Neighbourhoods with little sub-prime [mortgage] exposure are holding
on very well, while prices have fallen in neighbourhoods with a wide
prevalence of sub-prime loans because more foreclosed properties are
being sold at discounted prices.=94.
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