Bernanke urges action to heal housing markets (Reuters)

ORLANDO, Florida (Reuters) ? Federal Reserve Chairman Ben Bernanke on Friday issued a call to action to restore housing markets, saying depressed house prices and sales are a serious drag on the economic recovery.

"The state of housing has been an impediment to a faster recovery," he told a home builders' conference.

"We need to continue to develop and implement policies that will help the housing sector get back on its feet," Bernanke said, laying out a few ideas from a recent Fed "white paper" on housing.

Bernanke's recommendations for potential policy remedies fly in the face of complaints from some Republicans lawmakers that the Fed was making an unwarranted intrusion onto the turf of other policymakers.

The white paper, issued last month, was the result of several months of study by a Fed staff on a problem officials at the central bank have concluded is a key missing ingredient to a healthier economic recovery.

In his speech, Bernanke touched only on some of the less controversial ideas broached by the Fed in the paper.

He called on lenders and regulators to look at rules and practices that may hold back the origination of sound mortgages, pointing at overly tight credit as one reason the housing recovery has been slow.

An overhang of vacant homes and a glut of foreclosures is also weighing on housing activity, Bernanke added. He said it could make sense in some markets to turn some of the foreclosed homes into rental properties, a policy the Obama administration is already pursuing.

Another top Fed official - Cleveland Federal Reserve Bank President Sandra Pianalto - also pointed at housing on Friday as a key impediment to a stronger recovery, calling it "a significant headwind."

Pianalto, who is a voter this year on the Fed's policy-setting panel, said declines in housing wealth were keeping consumers away from stores and making harder for businesses to borrow. Bernanke said the loss of housing wealth may be chopping $200 billion to $375 billion off of consumer spending per year.

Several Fed officials have come forward since the white paper was released to push for action, although it has caused discomfort in some quarters of the central bank's system.

Bernanke made the case that overly tight credit in mortgage markets had undercut the effectiveness of the Fed's aggressive efforts to stimulate growth.

The Fed cut overnight interest rates to near zero in 2008 and has bought $2.3 trillion in bonds in a further effort to drive mortgage and other borrowing costs lower.

In a typical recovery, a rebound in housing fuels hiring and income gains, but that has not been the case this time, Bernanke said.

In the face of the congressional criticism of the white paper, Bernanke recently told lawmakers he was sorry if the central bank's efforts were misunderstood as anything but a helpful effort to spell out policy options.

He defended the study again on Friday.

"One of our main objectives ... was simply to make people aware how central to the recovery housing is," Bernanke said in response to a question from the audience.

(Reporting by Barbara Liston in Orlando and Mark Felsenthal and Pedro Nicolaci da Costa in Washington; Writing by Mark Felsenthal; Editing by Neil Stempleman and Tim Ahmann)

Source: http://us.rd.yahoo.com/dailynews/rss/economy/*http%3A//news.yahoo.com/s/nm/20120210/bs_nm/us_usa_fed

john kerry prince fielder james farentino demi moore hospitalized somali pirates navy seals navy seal team 6