CHICAGO — Federal Reserve Chairman Ben Bernanke spoke yesterday about the problems in the subprime mortgage market, rising foreclosures and possible regulatory responses in a speech at the Chicago Federal Reserve Bank here.

Tracing the growth in the subprime market, Bernanke said, "Having emerged more than two decades ago, subprime mortgage lending began to expand in earnest in the mid-1990s, the expansion spurred in large part by innovations that reduced the costs for lenders of assessing and pricing risks." That resulted in 69% of households owning their homes in 2006 while in 1995, only 65% did, he said.

Bernanke allowed that, "The practices of some mortgage originators have also contributed to the problems in the subprime sector," but warned of overreacting. "In deciding what actions to take, regulators must walk a fine line; we must do what we can to prevent abuses or bad practices, but at the same time we do not want to curtail responsible subprime lending or close off refinancing options that would be beneficial to borrowers," he said.