San Francisco Fed president Janet Yellen is concerned about recent economic data and recommends more action to save homeowners from foreclosure. From Bloomberg (hat tip reader Dwight):
Federal Reserve Bank of San Francisco President Janet Yellen said recent data on the U.S. economy is “deeply worrisome” and the government should consider new ways to help homeowners and stem foreclosures.
“Clearly, we have a long way to go before the credit crunch shows significant healing,” Yellen, 62, said today in the text of a speech in Berkeley, California. “We are in the grip of an adverse feedback loop,” in which tighter credit conditions are exacerbating economic weakness…..
“Recent data on the economy has been deeply worrisome,” Yellen, who doesn’t vote on interest rates this year, said during a symposium held at the University of California, Berkeley. In the current quarter, “it appears likely that the economy is contracting significantly” and “inflation risks have diminished greatly,” she said…
The Fed’s actions to lower rates and boost liquidity “have been helpful,” Yellen said. “But the enormity of this crisis required more,” she said, adding that she supports increased aid to homeowners.
“The effects of the growing credit crunch have outpaced the easing of policy, and, indeed, every major sector in the economy has been adversely affected by it,” Yellen said…
Home prices in 20 U.S. cities fell 16.6 percent in August from a year earlier, and have dropped every month since January 2007, the S&P/Case-Shiller home-price index also showed this week.
“Unfortunately, this is another case where the bottom is not yet in sight,” Yellen said of home prices, adding that “direct assistance to homeowners and the housing market are worthy of serious consideration.”
With the dollar appreciating against other currencies, “exports will not provide as much of an impetus to growth as they did earlier in the year,” the bank president said.
The text of the speech is here.