NEW YORK (CNNMoney.com) -- Losses in the fast-unraveling subprime lending market could top $100 billion, but the Federal Reserve is taking measures to protect borrowers, according to Fed Chairman Ben Bernanke.
"The credit losses associated with subprime have come to light and they are fairly significant," Bernanke told the Senate Banking Committee in a second day of testimony on the Fed's twice-yearly economic report.
"Some estimates are in the order of between $50 billion and $100 billion of losses associated with subprime credit problems," he said, referring to a segment of the mortgage market that caters to borrowers with shaky credit.
Defaults on mortgages in the subprime sector have risen sharply in the last few months, resulting in the implosion of several subprime mortgage lenders and funds that bought the repackaged debt. Investors fear more banks and funds will get caught holding bad loans, creating problems across the broader economy.
Bernanke said that the most reliable indicators show U.S. home prices have not declined nationally and that the housing slump had so far not led U.S. consumers to cut back on spending.
He said, however, that if prices did drop, consumers might trim spending by as much as 9 cents for each dollar of wealth lost.
As a result of the weaker-than-expected housing sector, the Fed has lowered its growth forecasts for this year and next, but the U.S. central bank believes the drag should ease over time.