Monday, July 28, 2008

IMF Says U.S. Housing Slump End `Not Visible,' Credit to Worsen

By Christopher Swann

July 28 (Bloomberg) -- The International Monetary Fund said there's no end in sight to the U.S. housing recession and warned that deteriorating credit conditions for consumers and banks may prolong a period of slow economic growth.

``At the moment, a bottom for the housing market is not visible,'' the IMF said in its Global Financial Stability Report, released today in Washington. ``Stemming the decline in the U.S. housing market is necessary for market stabilization as this would help both households and financial institutions to recover.''

The IMF, which a year ago failed to foresee the depth of the subprime mortgage collapse, stood by its April forecast for about $1 trillion in losses stemming from the U.S. mortgage crisis. While U.S. policy makers have helped contain the financial losses, ``credit risks remain elevated'' and banks need to raise more capital.

Worldwide asset writedowns and losses have totaled $469 billion in the past year and $345 billion has been raised.

The Washington-based lender in the report said the Federal Reserve's decisions to expand lending to Wall Street firms ``have succeeded in containing systemic risks.'' Still, weakness in housing threatens to extend the slump.

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