Ben Bernanke, Federal Reserve chairman, yesterday called on banks to forgive chunks of mortgage loans issued to troubled borrowers as pressure grew in Congress for government intervention to resolve the worsening US housing crisis.

The remarks by Mr Bernanke contributed to a fall in US share prices, with the S&P 500 index down 1.6 per cent in afternoon trading, as investors worried that rising foreclosures would further erode bank earnings and slow the economy.