Fed to Crack Down on Subprime Loans

Also plans to extend low-cost overnight loan program for banks
By Kevin Spak,  Newser Staff
Posted Jul 8, 2008 8:26 AM CDT
Federal Reserve Chairman Ben Bernanke delivers his keynote address at the FDIC Forum on Mortgage Lending for Low and Moderate Income Households, Tuesday, July 8, 2008, in Arlington, Va.    (AP Photo/Luis M. Alvarez)
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(Newser) – The Federal Reserve will issue new rules next week restricting subprime lending and other exotic loans aimed at borrowers with weak credit, Ben Bernanke said today. He said the Fed is also considering extending the overnight low-cost loan program, which helps big banks in need of quick cash, a sign that the Fed believes the financial crisis will continue into 2009.

“Our efforts today are concentrated on helping the financial system return to more normal functioning,” Bernanke said. “It is not too soon, however, to begin to think about the steps we might take to reduce the incidence and severity of future crises.” He also reiterated that Fannie Mae and Freddie Mac, which took massive stock dives yesterday, are key to his mortgage recovery plan.