Bernanke: Little Spillover from Subprime Woes

The problems have been limited mostly to so-called subprime borrowers with adjustable-rate loans, he said in the text of a speech posted on the Federal Reserve’s web site.

During the past year, serious delinquencies in that part of the real estate sector have risen rapidly to about 11 percent of all loans, Bernanke he added.

While the number of those figures will increase during the next year and a half "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system," he said.

During the past year some of the largest lenders focusing on subprime loans have entered bankruptcy or have gone out of business. In his comments, Bernanke said the problems have not extended to banks or thrift institutions.

"We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers," Bernanke said.

"At the same time, we must be careful not to inadvertently suppress responsible lending or eliminate refinancing opportunities for subprime borrowers."