WASHINGTON, March 9 (Reuters) - Minneapolis Federal Reserve Bank President Gary Stern said on Friday that recent problems in the subprime mortgage market have not produced broader spillover yet.
In an answer to a question at a monetary policy forum, Stern said, however, that the impact of such disturbances have yet to be “fully stress-tested.”
The subprime mortgage market — where borrowers have poor credit — has recently been roiled following rising concerns about risks and a declining housing market.
Separately, St. Louis Federal Reserve President William Poole said that a large financial disturbance could prompt the Fed to provide liquidity to the markets.
“The possibility of a liquidity upset or crisis is a financial disturbance that may have some policy implications for the Fed to provide some liquidity,” he said, citing the situation after the Sept. 11 attacks where markets seized up.
“If GSEs get into trouble, if their actions became suspect, it would create an enormous impact around the world,” he said, reiterating a previous remark.