Fed's Evans:Rescue package will work, housing sector key

LOST PINES, Texas, Oct 6 (Reuters) - The U.S. government's $700 billion rescue package will have a beneficial effect on financial markets, but it is important to turn around the housing sector, a Federal Reserve official said on Monday.

Responding to questions, Chicago Federal Reserve Bank president Charles Evans said financial institutions were "looking at their balance sheets and not knowing what their assets were worth".

Evans said there were many unsold houses which would continue to be a drag on the economy, adding that in the mortgage crisis there had been misbehavior on both the selling and buying sides.

He said the financial sector faced a period of stronger regulation going forward.