The economists attending the joint University of California, Berkeley – UCLA Ziman Center for Real Estate symposium had hoped to ask questions. Instead, they got a 20 minute speech by Bernanke about getting the mortgage industry lending again.
"Our task now is to begin thinking about how to best reestablish a link between homebuyers and capital markets in a way that addresses the weaknesses of the old system," Bernanke said.
Bernanke did not say Fannie May and Freddie Mac were dead. In fact, restoring them as buyers and sellers of mortgages to provide lenders with capital was the first of four options he suggested. He also brought up getting the government out of the mortgage process, going to a European system called covered bonds (which are issued by banks) or more government intervention.
"Key objectives of that reconsideration include both minimizing systemic risk and putting in place the most efficient mechanism possible for providing the mortgage credit necessary to sustain home ownership and a healthy housing sector," Bernanke said.
What Bernanke did not talk about was an immediate solution.
"He said very little, if anything, about what should be done in the short-term crisis," economist Aaron Edlin said."
It could be that the Fed is waiting to see who will win next week's election.
"I think there is a little bit of inertia both as we await for the results of the elections but also just in terms of the developing of these new programs that the lenders certainly are going to be likely to see what all their options are before they move forward," Paul Leonard of the Center for Responsible Lending said.
As loan restructuring programs evolve, some homeowners may line up for loan relief, even if they are not in dire straits.
"Of course they will," director of the UCLA Anderson Economic Forecast Edward Leamer said. "There'll be hundreds of thousands who will take advantage of it, of course. If it's an opportunity, they're going to obviously jump on it."
Bernanke did not take questions because the Fed has a rule about maintaining a silent period for one week following an interest rate cut, which they did earlier in the week.
