Sub Prime Losses will not Impact Larger Economy Says Fed

Federal Reserve Chairman Ben Bernanke, in a second day of testimony before Congress, said this morning (July 19) that the Fed expects losses from subprime loans gone bad will total between $50 billion and $100 billion, which would not be big enough to threaten the larger economy. This was the first time Bernanke put a number on the subprime problem.

Testifying today before the Senate Banking Committee, Bernanke explained that he expects the subprime shakeout to remain confined, although he allowed that it is likely to continue to put downward pressure on the housing business. He reiterated testimony he gave yesterday before the House Committee on Finanical Services that he expects the downturn in new home building to persist over the next several quarters into 2008.

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