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Federal Reserve Chairman Ben Bernanke smiles during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill, February 14, 2008 in Washington DC. - 


Lisa Napoli: Federal Reserve Chairman Ben Bernanke heads up to Capitol Hill today. He'll be delivering a scheduled economic report to Congress, and many will be watching for signals of more interest rate cuts ahead. But even with the cuts we've had since September, Americans are actually seeing higher rates on their mortgages. Jeremy Hobson reports.

Jeremy Hobson: Don't be surprised if you hear the word "conundrum" today.

In Alan Greenspan's last year on the job, he used that word to describe this problem: The Fed was raising interest rates, but rates for long-term bonds and mortgages were staying low. Now, Ben Bernanke has the opposite problem. The Fed is cutting, but long-term mortgage rates are going up.

Princeton Economist Alan Blinder says here's why:

Alan Blinder: Lenders are much more fearful of default, and that sort of fear will always drive up any interest rate.

In fact, the average rate for a 30-year rate mortgage cracked 6 percent last week. That means on average, an extra hundred dollars per month for a $300,000 mortgage.

Blinder says that's proof the Fed is not getting bang for the buck when it lowers the federal funds rate.

Blinder: If it could rule the world, it would create a world where every time it lowered its interest rate, all the interest rates including mortgages fell. That's by no means the world it's living in.

In Washington, I'm Jeremy Hobson for Marketplace.

Follow Jeremy Hobson at @jeremyhobson