By Steven K. Beckner
ST. LOUIS (MNI) – Federal Reserve policymakers face a tough
decision early next month when they decide whether or not to pump more
money into the economy, and one of the things weighing on their minds is
the brewing controversy over home foreclosures.
St. Louis Federal Reserve Bank President James Bullard, a voting
member of the FOMC, indicated Thursday he is not greatly concerned about
the foreclosure mess, but said it is a potential concern for the economy
and in turn for the Fed.
In a give-and-take with reporters at a St. Louis Fed conference,
when asked whether the slowdown and threatened moratorium on bank
foreclosures could further impede the housing and economic recovery and
affect monetary policy, Bullard replied cautiously.
“It’s possible that it will,” he said, adding, “At this point it
has not gone on long enough to be an important consideration.”
“You do want markets to function freely and you do want markets to
clear as best they can,” he said.
“And we have a lot of inventory and a lot of problems in the
housing market,” he continued. “So we would like to see those markets
working as smoothly as possible.”
Earlier this week, New York Federal Reserve Bank President
President William Dudley said the foreclosure moratorium means “the
situation in housing remains uncertain for the foreseeable future.”
The Fed is urging banks to find alternatives to foreclosure, like
loan modifications. But if that’s not possible, Dudley said foreclosures
that properly comply with state and federal law must take place —
calling that “a necessary part of the adjustment” that will return the
housing market” to “more normal conditions.”
Dallas Fed Richard Fisher said “the foreclosure debacle has added a
serious wrinkle to the potential for a clearing of that crucial market.”
** Market News International **
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