U.S. housing and credit markets remain fragile and won't recover for some time, a key Federal Reserve official said Tuesday, implying significant risks to the Fed's forecast for a modest improvement in the economy. "Recent events suggest that housing will remain weak for several more quarters," said William Poole, president of the St. Louis Federal Reserve Bank, and a voting member of the Federal Open Market Committee this year. "Stabilization may not begin until well into 2008." The financial markets, which were truck in August by a crisis of confidence in securities backed by mortgages and other unknown assets, "appear to be stabilizing, but they have not returned to normal and are still fragile." The Fed doesn't want to "bail out bad investments," and couldn't if it wanted to, Poole said. "We do have the responsibility to do what we can to maintain normal financial market processes." "It is for the market to judge whether securities backed by subprime mortgages are worth 20 cents on the dollar, or 50 cents, or 100 cents," he said. "That process will take time, as it is expensive to conduct the analysis that good mortgage underwriting would have conducted in the first place." http://www.marketwatch.com/news/sto...x?guid={B328CB4F-885B-46DC-B13E-BF31E8A90E17}