WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday that some small U.S. banks might go under during the current stress prompted by housing market problems, but the U.S. bank system overall remained solid.
“I expect there will be some failures,” Bernanke told the Senate Banking Committee, referring to smaller regional banks who became heavily invested in real estate.
“Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system,” he said in response to a question during semi-annual congressional testimony.
Bernanke's remarks hit U.S stocks, pushing losses on the Dow Jones Industrial Average .DJI to around 1 percent.
Big U.S. banks have already raised billions of dollars of fresh capital to make good on losses on subprime mortgages, often by tapping foreign investors. Bernanke said that he hoped this trend would continue in order to bolster lending.
“They have already sought something of the order of $75 billion of capital in the last quarter. I would like to see them get more,” Bernanke said.
“They have enough now certainly to remain solvent and remain ... well above their minimum capital levels. But I am concerned that banks will be pulling back and not making new loans and providing the credit which is the lifeblood of the economy. In order to be able to do that ... in some cases at least, they need to get more capital,” Bernanke added.
Reporting by Alister Bull; Editing by Theodore d'Afflisio