Federal Reserve Chairman Ben Bernanke pledged the central bank will make every effort to soften the damage from a wave of home foreclosures, which he said stem partly from reckless lending.
Speaking to the annual meeting of the National Community Reinvestment Coalition, Bernanke sketched out causes for the current distress without commenting directly on monetary policy. The Fed is expected to again cut benchmark interest rates at a policy meeting on Tuesday.
"Far too much of the lending in recent years was neither responsible nor prudent," he said, but he felt lending to less creditworthy borrowers had been beneficial in the past and will be again at some future point.
Much of the strain in mortgage markets that has spilled into the broader economy originated with so-called subprime mortgages, many of which were made with inadequate research by lenders to borrowers who had little hope of repaying them.