Federal Reserve chairman Ben Bernanke went before Congress today, two days after trimming the benchmark lending rate, and said new foreclosures will come as more subprime mortgages run out clocks on initial interest rates. Markets “do tend to self-correct” in crises, the economic guru said, and the global system is “in a relatively strong” place to overcome the credit crunch.
Bernanke said the deep cuts were meant to keep the economy ahead of its challenges and to prevent further spread of crisis. About two million loans will reset to higher rates over the next two years, and delinquencies and defaults will most likely follow. Bernanke also advised against raising the loan limit for government-chartered lenders Fannie Mae and Freddie Mac.