The Associated Press

WASHINGTON - American households' finances are generally in good shape even though consumers have built mountains of debt and bankruptcy filings have surged, Federal Reserve Chairman Alan Greenspan said Monday.

Decades of low interest rates and extra cash from refinancing have given people flexibility to better manage their debt, the Fed chief said in a speech to a credit union conference.

The financial health of consumers is important to the economy, which in the second half of last year finally cast off its lethargy and has been growing at a healthy pace. Consumer spending accounts for roughly two-thirds of all economic activity in the United States.

Consumer debt hit a record $2 trillion in December, according to the most recent figures of the Federal Reserve. That debt includes credit cards and car loans, but not mortgages.

More than 1.6 million people filed for personal bankruptcy in fiscal year 2003. Personal bankruptcies rose 7.8 percent in the 12 months ending Sept. 30, according to the Administrative Office of the U.S. Courts.

While elevated bankruptcy rates in the past several years are troubling, Greenspan said that "bankruptcy rates are not a reliable measure of the overall health of the household sector."

Greenspan noted that delinquency rates on credit card payments have been falling during the past year even as consumers' credit card debt has grown. The rise in credit card debt in the latter half of the 1990s, he said, is mirrored by a fall in unsecured personal loans. That suggests homeowners have shifted a variety of payments to credit cards.

Two gauges the Fed likes to use to assess the extent of American household indebtedness "rose modestly over the 1990s," Greenspan said. "During the past two years, however, both ratios have been essentially flat."

The debt-service ratio measures the share of income devoted by households for paying interest and principal on their debtThe Fed's second measure, called the general financial obligations ratio, incorporates households' other recurring expenses, such as rents, auto leases, homeowners' insurance and property taxes, he said.

"Overall, the household sector seems to be in good shape and much of the apparent increase in the household sector's debt ratios over the past decade reflects factors that do not suggest increasing household financial stress," Greenspan said.