*Greenspan:US Households May Have Hard Time Repaying Debts
DOW JONES NEWSWIRES
WASHINGTON -- Federal Reserve Chairman Alan Greenspan said Wednesday that U.S. households will have a difficult time paying off the debt they built up in the last two years, although he said loan delinquencies will not reach a scale that could imperil the U.S. economic recovery.
Delivering a semiannual report to Congress on the state of the U.S. economy, Greenspan said the ratio of household wealth to income declined during the recession - to 5.3 from a peak of 6.3 at the end of 1999. That change, he said in prepared remarks to the House Financial Services Committee, is "probably damping consumer spending, at least to a degree."
Greenspan said Fed research shows that the richest 5% of American households saw their debt-to-income ratios climb to 1.20 at the end of the third quarter of 2001 from 1.10 at the end of 1998. Such households accounted for 44% of after-tax U.S. household income last year. Poorer households saw a smaller increase in the ratio, but could still have difficulty paying off their debts , he said.
"Although high-income households should not experience much strain in meeting their obligation, others might," Greenspan said. "Indeed repayment difficulties have already increased, particularly in the subprime markets for consumer loans and mortgages. Delinquency rates may well worsen as a delayed result of the strains on household finances over the past two years."
"Large erosions, however, do not seem likely, and the overall levels of debt and repayment delinquencies do not, as of now, appear to pose a major impediment to a moderate expansion of consumption spending going forward," Greenspan said.
-By Joseph Rebello, Dow Jones Newswires; 202-862-9279; joseph.rebello@dowjones.com
Updated February 27, 2002 10:48 a.m. EST |
