U.S. financial markets continue to be buffeted by volatility generated by problems in the depressed housing market. VOA's Barry Wood reports a congressional committee discussed the matter Wednesday, while new data reveal further weakness in housing.
Members of the U.S. Congress are concerned about the rising rate of repossessions of homes whose owners can not make their monthly mortgage payments. Foreclosures have reached multi-year highs and there is no sign of improvement anytime soon. In the Financial Services Committee, Atlanta area Democratic congressman David Scott complained that lenders were reckless in pushing home loans on buyers with bad credit histories. "Loans are being made to people who ought not to get these loans. Something ought to be done about that. Something ought to be done about loan originators who are sitting there knowing that these people do not have the capacity to pay," he said.
These higher risk mortgages known as sub-prime loans have triggered large losses for lenders and home-buyers. The problem has rippled through global credit markets as U.S. financial institutions packaged sub-prime loans and sold these high-risk but high-yielding loans to banks around the world.
The New York stock exchange fell more than 143 points Wednesday, with banks and construction companies recording the biggest decline. After record gains in July, the market began to decline, largely on reports of troubles in the housing market.
Doug Sandler, an economist at Wachovia Securities, tells Bloomberg News that the problem is not yet resolved. "I think ultimately the Fed (Federal Reserve) will fix it and the way they're going to fix it is by lowering (interest) rates. But it may take more than one move. And it is probably not going to happen all at once," he said.
The weakness is housing is prompting forecasters to scale back their estimates of U.S. economic growth for the remainder of this year. The expectation is that in order to boost the economy the central bank will cut short-term interest rates in mid-September.
An index of existing home sales in the United States fell in the most recent reporting period to its lowest level since September 2001.