Fed chief wants more action to stem tide of foreclosures

WASHINGTON — Federal Reserve Chairman Ben Bernanke pleaded Thursday for more government action to relieve the foreclosure crisis and break a vicious cycle in which the housing meltdown is plunging the country deeper into recession.

Beaten-down shoppers, meanwhile, handed retailers their worst month in at least 39 years. And the number of people drawing jobless benefits hit a 26-year high, with the November employment figures due out Friday likely to show more deep job cuts.

"We are probably at the absolute worst of the recession right now," said Mark Vitner, economist at Wachovia Corp.

With soaring foreclosures feeding the country's economic woes, Bernanke called on the government to ratchet up efforts to help people at risk of losing their homes.

Despite steps already taken to try to ease the crisis, foreclosures remain "too high," hurting homeowners, lenders and the broader economy, Bernanke told a Fed conference here on housing finance.

"More needs to be done," he declared.

Lenders appear on track to initiate 2.25 million foreclosures this year, up from an average annual pace of less than 1 million before the crisis, he said.

"Weakness in the housing market has proved a serious drag on overall economic activity," Bernanke said. "Steps that stabilize the housing market will help stabilize the economy, as well."

The fallout is forcing consumers to hibernate, and retailers have suffered the consequences.

Costco Wholesale Corp., usually a strong performer, reported a bigger-than expected sales drop. And most mall-based chains and department stores, such as teen stalwart Abercrombie & Fitch Co., Kohl's Corp. and Macy's Inc., reported sales declines of more than 10 percent. One notable exception from the largely grim sales results: Wal-Mart Stores Inc. posted sales gains.

Overall, sales dropped 2.7 percent last month, according to one tally of retail activity, the Goldman Sachs-International Council of Shopping Centers index based on 37 stores. It was the worst showing since at least 1969, when the index began.

Consumer spending — which includes retail sales — accounts for about two-thirds of total economic activity. And job cuts, tanking investment portfolios and sinking home values have made American consumers wary of spending.

Further evidence of the slowdown came Thursday in a Commerce Department report that said factory orders plunged in October by 5.1 percent, the largest decline in eight years.

Demand for non-defense capital goods, considered a good proxy for business investment plans, fell by 5 percent in October, the biggest decline since January and the fourth straight monthly decrease.