Bernanke, under fire from lawmakers for the Fed's failure to step in earlier to prevent massive mortgage fraud and lending abuse that helped fuel the nation's housing bubble, said the Fed and other regulators will issue stronger rules soon to protect consumers.I have been saying for some time that this situation will almost surely have a negative impact on the economy as a whole as people will have less money to spend as a result of the subprime mortgage disaster.
In testimony on Capitol Hill, Bernanke pinned much of the blame for the recent economic slowdown on the "ongoing adjustment in the housing sector."
Yesterday I was speaking with a friend who is a mortgage underwriter and she told me that her office has slowed to a crawl and that many branches of her firm may close as a result of the subprime mortgage disaster.
The problem is that stricter underwriting guidelines that are being imposed, to stop this from happening again, has ruled out many from the housing market. In order for the market to recover it will take a price correction that will allow people to actually qualify under the new stricter guidelines.
I predicted a recession for the end of this year or early in 2008. If that happens the Republican party will pay dearly for a complete lack of oversight that has allowed the big money interests to prosper at the expense of the American middle class.