Thursday, January 13, 2005

Fed Gov Knocks Subprime Risks

USA Today reported that Federal Reserve Governor Edward Gramlich publicly warned that subprime lending may be a problem. "The subprime incidence of mortgage brokers without a lot at stake in the game is getting pretty high," the Fed official said.

He backed off of earlier statements that "that portion of the subprime industry was veering close to a breakdown", later stating that "phrasing too strong". But he did point out the higher delinquency with subprime borrowers.

Gramlich addressed the bubble issue, "It's certainly possible it's a bubble, but it's also possible, for various reasons, the cost of housing has shifted."


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