'Bernanke predicts banks will go under'

The prospect of a banking failure in the US was raised yesterday by the Federal Reserve chairman, Ben Bernanke, as the dollar plunged to a record low against the euro and gold surged to an all-time high.

On the second day of his biannual testimony to Congress, Bernanke said that some small US banks were likely to go under from the effects of the credit crunch and soaring mortgage delinquencies.

"I expect there will be some failures," he said. "I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

But Bernanke also warned of higher global inflation. "We do have greater inflation pressure at this point than we did in 2001," he said. . . .

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