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US Officials Go to Congress to Discuss Crisis Over Bad Loans

The fallout from bad loans in the U.S. housing sector Tuesday continued to affect global financial markets. VOA's Barry Wood reports the U.S. treasury secretary and central bank chief met with a key congressional leader to discuss economic woes caused by problems in the U.S. housing market.

Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson came to Capitol Hill to meet with Christopher Dodd, the head of the Senate Banking Committee. Afterward, Senator Dodd, a Democratic Party presidential hopeful, expressed concern about how the month old credit squeeze is affecting home owners.

"We're at a 37-year high on foreclosures in this country, a 10-year low on housing starts," said Senator Dodd. "This is a very serious issue."

Several financial institutions have gotten into trouble high-risk borrowers have had difficulty meeting their payments on home mortgages.

The weakness in the housing sector has caused tremors on Wall Street, sending the stock prices of some big financial institutions down significantly. Treasury Secretary Paulson says the distress in housing is likely to slow the pace of economic growth.

"What's going on right now in the capital markets will in all likelihood take a penalty, take a toll on economic growth," said Secretary Paulson. "Economic growth will be less than otherwise would have been."

President Bush also commented about the economy Tuesday, but he said American economic fundamentals remain strong.

"Inflation is down, interest rates are low, the employment picture is strong, exports are up," said President Bush. "We grew at over three percent in the second quarter. The fundamental question is, is there enough liquidity in our system as people re-adjust risk? And the answer is yes there is."

Last Friday, in an effort to restore confidence and steady the markets, the Federal Reserve lowered one of its interest rates and said it is ready to provide cash to financial institutions that need it.