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Bernanke: Home Borrowing Just Fine In "Individual" Cases

Bill Miller
Source: Logg Mason
Bill Miller

Even before Alan Greenspan uttered the notorious " 'R' word," the housing sector was a matter of some concern. Federal Reserve Chairman Ben Bernanke spoke on the ups and downs of housing in his testimony before the House Budget Committee, which was carried live during "Morning Call."

Rep. Allyson Schwartz (D-Penn.) asked Bernanke to address what some see as "risky behavior" among homeowners, such as borrowing to meet basic obligations, e.g., health care costs.

The Fed chief underscored that wealth from run-ups in home or stock prices "aren't counted in the national savings rate." Thus, he conceded that the ability to draw off equity from one's house can "probably contribute" to dragging down America's collective savings.

But he maintained that "individual circumstances" differ enough to make a judgment on the matter. For long-term homeowners, it sometimes makes sense to use the equity in their house for such things as college tuition.

As to the possibly reckless borrowing that led to last week's rumblings in the higher-risk subprime lending sector, Bernanke declared himself a "strong advocate" for family "counseling, education in financial literacy" -- "especially for poorer families."