While the supply of subprime credit has fallen, it has not "evaporated," says Federal Reserve Board Chairman Ben Bernanke, thanks to increased purchases by investment banks and hedge funds.Wall Street firms and other private pools of capital are "beginning to fill the void" left by the failure of many subprime lenders, the Fed chairman said in a major address about problems in the subprime market. He said there are some signs of a "self-correction" in the subprime market due to delinquency and foreclosure rates, which are expected to remain at high levels into 2008. But curbs on subprime lending will "restrain" home purchases and residential investment in coming quarters. "All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime market will likely be limited," Mr. Bernanke said.

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