Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke went before the House Oversight and Government Reform Committee Wednesday to discuss lessons learned from Europe’s sovereign debt crisis.
Chairman Ben Bernanke said the European debt crisis still poses risks to the U.S. economy, but recent stress tests on major U.S. banks shows that many would be able to survive an economic downturn.
Secretary Geithner responsed to questions about the U.S. housing market and hinted at the possibility of a deal that would allow principle reduction on mortgages backed by Fannie Mae and Freddie Mac.
The European Union has been struggling with a crisis over the huge debts faced by its weakest economies which were also the most battered by the global recession, a consequence of the global financial crisis 2008.
Since the crisis, the Federal Reserve has assisted foreign counterparts by provide monetary support. In November, the Fed and it's worldwide counterparts announced a cut in the interest rate premium charged to over seas banks which borrow in dollars. The monetary policy targeted struggling European banks.
In a Senate hearing earlier this year, leading economists also testified on the European debt crisis and the outlook for the eurozone. They said that the U.S. should treat the crisis as a wake-up call and urged lawmakers to bring down debt and spending to sustainable levels.