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“Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,” Bernanke said in a speech in Orlando, Florida today. “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.”

Bernanke’s call goes beyond the stance of the Bush administration and previous Fed comments. By comparison, the central bank’s Feb. 27 report to Congress called for lenders to “pursue prudent loan workouts” through means such as modifying mortgage terms and deferring payments.

“Delinquencies and foreclosures likely will continue to rise for a while longer,” Bernanke said in the comments to the Independent Community Bankers of America. “Supply-demand imbalances in many housing markets suggest that some further declines in house prices are likely.”

Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point, he said. “Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest-rate resets will nevertheless impose stress on many households.”

`Vigorous Response’

In the past, homeowners could refinance, though that option is now “largely” gone because sales of bonds backed by subprime mortgages “have virtually halted,” Bernanke said. “This situation calls for a vigorous response.”

And perhaps not coincidentally, the board has been renamed. Under the older Executive Order from 1993, it was called the President’s Foreign Intelligence Advisory Board (PFIAB). Now it has been renamed the President’s Intelligence Advisory Board (PIAB), suggesting perhaps that the Bush administration had domestic intelligence activities in mind while making these revisions.

As usual, the brunt is falling disproportionately on the poor. The F.A.O. estimates that the cereal import bill of the neediest countries will increase by a third for the second year in a row. Prices have gone so high that the World Food Program, which aims to feed 73 million people this year, said it might have to reduce rations or the number of people it will help.

The world has faced periodic bouts when it looked as if population growth would outstrip the food supply. Each time, food production has grown to meet demand. This time it might not be so easy.

Population growth and economic progress are part of the problem. Consumption of meat and other high-quality foods —mainly in China and India— has boosted demand for grain for animal feed. Poor harvests due to bad weather in this country and elsewhere have contributed. High energy prices are adding to the pressures.

Yet the most important reason for the price shock is the rich world’s subsidized appetite for biofuels. In the United States, 14 percent of the corn crop was used to produce ethanol in 2006 — a share expected to reach 30 percent by 2010. This is also cutting into production of staples like soybeans, as farmers take advantage of generous subsidies and switch crops to corn for fuel.

The benefits of this strategy are dubious. A study by the Organization for Economic Cooperation and Development suggested that — absent new technologies — the United States, Canada and the European Union would require between 30 percent and 70 percent of their current crop area if they were to replace 10 percent of their transport fuel consumption with biofuels. And two recent studies suggested that a large-scale effort across the world to grow crops for biofuels would add carbon dioxide to the atmosphere rather than reduce it.

Thousands of people, including friends and families of those who died in the Sept. 11, 2001, terrorist attacks, gathered near the hulking gray ship, trimmed in red, white and blue banners.

The bow stem, which contains 7.5 tons of steel from the site, bore a shield with two gray bars to symbolize the twin towers and a banner over that declaring “Never Forget,” a slogan among New Yorkers.

“May God bless this ship and all who sail on her,” Dotty England said before smashing a bottle of champagne against it, producing a loud thump to go with the spurting liquid and flying streamers.

Story after story of lives lost in, and touched by, the attacks peppered the ceremony, held under the blazing sun and broadcast on large screens. It all brought back painful memories for New York Police Lt. Matt Murphy. But the reason for his being here, though, was a source of pride, he said.

“I tell you, it’s a fantastic day. Sometimes you think you’re over something,” he said, his eyes welling up as he looked off toward the ship, “and then you realize you’re not completely.”

Deputy Defense Secretary Gordon England, husband to Dotty, told the crowd that ship names provide a legacy, and that for their crews they serve as a source of strength and inspiration.

When the attacks occurred, the ship was planned but had no name. Then-New York Gov. George Pataki asked the Navy to commemorate the disaster by reviving the name New York. That required an exception to Navy policy of assigning state names only to nuclear submarines.

The steel from the towers is now part of the ship that splices through the water, leading the way.

Ben Griffin could be jailed if he makes further disclosures about how people seized by special forces were allegedly mistreated and ended up in secret prisons in breach of the Geneva conventions and international law. Griffin, 29, left the British army in 2005 after three months in Baghdad, saying he disagreed with the “illegal” tactics of US troops.

He told a press conference hosted by the Stop the War Coalition this week that individuals detained by SAS troops in a joint UK-US special forces taskforce had ended up in interrogation centres in Iraq and Afghanistan, as well as Guantánamo Bay. He had not witnessed torture himself but added: “I have no doubt in my mind that non-combatants I personally detained were handed over to the Americans and subsequently tortured.”

Referring to the government’s admission that two US rendition flights containing terror suspects had landed at the British territory of Diego Garcia, Griffin said the use of British territory and airspace “pales into insignificance in light of the fact that it has been British soldiers detaining the victims of extraordinary rendition in the first place”.

One family – the husband is a janitor, the wife a cleaner – bought their two bedroom bungalow in Oakland for $420,000 in 2005. Now their mortgage rate has reset and it is on the market for $119,000. It probably won’t fetch the list price.
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Over in Detroit there are now more than a handful of properties on the market at $100 (and no, that’s not a misprint – just search through property website realtor.com to see).

These kind of properties are all being sold by a very specific section of society – the so-called sub-prime buyers with poor credit records – or as Heidi puts it dolefully “It’s just the junk that’s coming back onto the market.”

However this is unlikely to remain the case. As unemployment rises – and it already is, sharply – more middle class families will find themselves out of a job and possibly having to sell. Experts also fear that whereas the so-called teaser rate problem is generally limited to working class families, a different mortgage-related issue could be about to strike the white-collar community.

President Hugo Chavez on Sunday promised Venezuela would respond militarily if Colombia violates its border, where he ordered tanks as well as thousands of troops. He also ordered closed Venezuela’s embassy in Bogota.

Ecuadorean President Rafael Correa said he deployed troops to the border while also withdrawing his government’s ambassador from Bogota and expelling Colombia’s top diplomat.

“There is no justification,” Correa said Sunday night, snubbing an earlier announcement from Colombia that it would apologize for the military incursion.

Chavez called the killing of rebel leader and spokesman Raul Reyes and 16 other guerrillas on Saturday an attack by a “terrorist state,” saying it shows Colombian President Alvaro Uribe is a “criminal.”

“Mr. Defense Minister, move 10 battalions to the border with Colombia for me, immediately — tank battalions. Deploy the air force,” Chavez said during his weekly TV and radio program. “We don’t want war, but we aren’t going to permit the U.S. empire, which is the master (of Colombia) … to come divide us.”

Correa said Colombia deliberately carried out the strike beyond its borders, flying deep into Ecuador to bomb the rebel camp from the south. The Ecuadorean leader said the rebels were “bombed and massacred as they slept, using precision technology.”

The Colombian military said the camp was located just over a mile from the border.

Colombian officials have long complained that rebels are allowed to take refuge across its borders in both Ecuador and Venezuela.

Colombia said after the assault that FARC “terrorists” including Reyes “have had the custom of killing in Colombia and taking refuge in the territory of neighboring countries.”

In Chile, President Michelle Bachelet offered to mediate in the conflict.

“A situation like this requires an explanation from Colombia to Ecuadoreans, to the Ecuadorean president and to the entire region,” Bachelet said. “We are very worried.”

Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter.
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The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe.

It is hard to imagine a more plain-vanilla outfit than the Port Authority of New York and New Jersey, which manages bridges, bus terminals, and airports.

The authority is a public body, backed by the two states. Yet it had to pay 20pc rates in February after the near closure of the $330bn (£166m) “term-auction” market. It had originally expected to pay 4.3pc, but that was aeons ago in financial time.

“I never thought I would see anything like this in my life,” said James Steele, an HSBC economist in New York.

No sane mortal needs to know what term-auction means, except that it too became a tool of the US credit alchemists. Banks briefly used the market as laboratory for conjuring long-term loans at Alan Greenspan’s giveaway short-term rates. It has come unstuck. Next in line is the $45trillion derivatives market for credit default swaps (CDS).

Last week, the spreads on high-yield US bonds vaulted to 718 basis points. The iTraxx Crossover index measuring corporate default risk in Europe smashed the 600 barrier. We are now far beyond the August spike.

Sub-prime debt is plumbing new depths. A-rated securities issued in early 2007 fell to a record 12.72pc of face value on Friday. The BBB tier fetched 10.42pc. The “toxic” tranches are worthless.