Fed Chair Ben Bernanke's next move will affect the housing market in general and specific lenders such as H&R Block (NYSE: HRB). Here's how Bernanke's thinking cascades through the economy:

• Increased credit risk aversion. The Wall Street Journal (subscription required) reports that Bernanke may see increased bank risk aversion measured by rising term premiums -- the additional return a lender demands for making longer rather than shorter-term loans -- as a reason to cut rates.
• Hits housing whose decline slows the economy. According to AP, UCLA forecasts that a recession may result from this risk aversion's impact on the housing market.
• Slamming mortgage originators. This hit to the housing market hurts mortgage originators -- DealBook reports that H&R Block's Option One subprime mortgage unit is slashing an additional 575 jobs on top of the 615 job cuts it announced in May.

I do not envy Bernanke -- no matter what he does at the Fed's next meeting, he will get criticized. Wall Street expects him to bail it out by cutting interest rates. Many in Congress agree with Wall Street but for different reasons -- they want to curry favor with voters who are facing foreclosures. Meanwhile, some believers in free markets would like the Fed to ignore those calling for rate cuts -- keep rates where they are to control inflation -- and let the market quickly and efficiently cull the failures.