Fed's Rosengren says banking woes could mount

By Jon Herskovitz

SEOUL (Reuters) - The woes of U.S. banks could mount as the economy slows down and with greater access to their confidential information, the Federal Reserve can make sound decisions, Boston Fed President Eric Rosengren said on Friday.

"I would say that while to date the problem banks have been quite low, there clearly has been some deterioration since the beginning of this year, and should the economy continue to slow down, as many expect, it is likely that we will continue to see some growth in the problem institutions," he told a seminar at the Bank of Korea.

Rosengren is regarded as one of the most dovish members of the Fed, but is not a voting member of the central bank's Federal Open Market Committee this year.

The Fed last week slashed benchmark lending rates by a hefty three-quarters of a percentage point to a three-year low of 2.25 percent, in addition to the other measures it has introduced to keep money flowing in markets.

Investors think it will cut rates again at its next scheduled policy meeting, on April 29-30.

"It is too soon to call whether or not we are in a recession. But regardless of what you call it, it is a period of very slow growth," he told reporters at the seminar.

"Slow growth does have the implication that you would expect a gradual increase in the unemployment rate," he said.

On the troubles caused by the subprime loan crisis, he said: "We need to see some stabilization in the housing market before I would be confident that the financial turmoil is over."  Continued...