Federal Reserve Chairman Ben Bernanke testified before the House Committee on Financial Services. He said that “foreclosures will get worse before they get better.”

The Fed estimates that the mortgage and foreclosure crisis will cause the forecasted performance of the GDP to be ¼ percent below this year’s forecast. That assessment is overly optimistic. Much of the fuel for consumer spending the last few years has been from the easy accessibility of credit. Tighter lending standards will turn off the spigot. In addition, millions of people make their living in the housing and real estate industry. Home construction is way off and home sales are down dramatically. From carpenters to real estate agents, incomes are down. A one-quarter percent downward adjustment in the GDP forecast is overly optimistic.