Federal Reserve Chairman Ben S. Bernanke delivered a stern warning Thursday to Senate Democrats regarding the European debt crisis and offered insight into stabilizing the ailing housing market, according to senators and aides who attended the meeting.
In a more than hour-long session, Bernanke spelled out “what the problems were, what the potential remedies are” in dealing with Europe’s mounting crisis, according to Sen. Dianne Feinstein (D-Calif.). Because of the traditional sensitivity to the chairman’s remarks and their impact on financial markets, senators declined to discuss the remedies Bernanke suggested.
However, Feinstein and Sen. Mark Warner (D-Va.) said they pressed Bernanke for his thoughts on how to help homeowners, given the consensus that failure to move more quickly to stem foreclosures has slowed the economic recovery.
Warner said it is now conventional wisdom that actions taken to improve the housing market after the 2008 collapse were not dramatic enough.
“The administration made good-faith efforts; they just haven’t been very successfully,” Warner said after their weekly luncheon focusing on policy issues. “And then there was a long period of kind of like, ‘Do no harm; the housing crisis will just work it’s way through the snake.’ It just hasn’t. I think there’s a growing recognition that that is a huge overhang on our economy.”
He said much of the senators’ conversation with Bernanke revolved around “the growing recognition from everyone—economists across the board—that there needs to be some more dramatic action in housing.”
Bernanke declined to answer questions from reporters as he emerged from the Capitol Hill meeting. But, senators said, Bernanke told the caucus that some relief could come next week when the Federal Housing Finance Agency announces new plans to try to enable homeowners who are under water to refinance.
Feinstein said she hoped the Fed chief would offer “recommendations,”but others suggested that Bernanke instead offered the assistance of the Fed staff to help senators as they try to craft legislation to deal with the issue.