Bernanke says some banks will fail

Washington -- U.S. Federal Reserve Chairman Ben Bernanke has predicted failures among small regional banks, but claimed foreign wealth funds would save larger ones.

"There will be some bank failures," Bernanke told the Senate Banking, Housing and Urban Affairs Committee Thursday.

"I don't anticipate any serious problems … among the large, internationally active banks that make up a very substantial part of our banking system," he said.

While some current economic patterns look like previous periods of decline, Bernanke said market upheaval in 2001 -- the large dot.com correction -- hurt financial investors, whereas the current home mortgage crisis is hurting homeowners. "Consumers are taking the brunt of the effects," he said.

Bernanke also noted that inflation in commodity prices had made the current situation "complicated," The Washington Times reported.

The economy grew a scant 0.6 percent in the fourth quarter of 2007, while inflation has rose 4.1 percent. But, Bernanke said the economy was not "anywhere near the situation that prevailed in the 1970s," when inflation and stagnation put together one-two punch on the economy refered to as "stagflation."

Copyright 2008 by United Press International.