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(CEP News) - The United States is suffering from a "liquidity lock" as risk aversion reigns the markets, said Boston Federal Reserve President Eric Rosengren. He partially blamed the recent bankruptcy of Lehman Brothers for money market losses.
Speaking to an audience at the University of Wisconsin Thursday night, Rosengren said economic growth in the U.S. for the second quarter was below its potential and consumer spending will possibly decline. He said that as long as the U.S. housing market suffers, so will real estate securities. Rosengren said if it were not for the international banking standards provided by the Basel II provisions, the United States could have been in more dire conditions. He said the United States needs a fresh approach to deal with the crisis, citing moves in Europe to inject equity. Rosengren said the Fed lending facilitation program is meant to be short term, but that everything depends on future conditions. By Megan Ainscow,
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