Bernanke blames tight credit for hindering U.S. economic recovery

Federal Reserve Chairman Ben Bernanke. SOURCE: Federal Reserve via Twitter

Federal Reserve Chairman Ben Bernanke blamed excessively tight credit conditions imposed by banks and mortgage lenders for hindering the U.S. economic recovery.

Here are the key excerpts from his speech at the Economic Club of New York on Nov. 20, 2012:

“Lenders have maintained tight terms and conditions on mortgage loans, even for potential borrowers with relatively good credit. Lenders cite a number of factors affecting their decisions to extend credit, including ongoing uncertainties about the course of the economy, the housing market, and the regulatory environment. Unfortunately, while some tightening of the terms of mortgage credit was certainly an appropriate response to the earlier excesses, the pendulum appears to have swung too far, restraining the pace of recovery in the housing sector.”

“Banks’ capital positions and overall asset quality have improved substantially over the past several years, and, over time, these balance sheet improvements will position banks to extend considerably more credit to bank-dependent borrowers. Indeed, some types of bank credit, such as commercial and industrial loans, have expanded notably in recent quarters. Nonetheless, banks have been conservative in extending loans to many consumers and some businesses, likely even beyond the restrictions on the supply of mortgage lending that I noted earlier. This caution in lending by banks reflects, among other factors, their continued desire to guard against the risks of further economic weakness.”

 

Learn More:

One Comment on “Bernanke blames tight credit for hindering U.S. economic recovery

  1. Pingback: Federal Reserve will keep interest rates at historic low until unemployment rate drops to 6.5% | What The Folly?!

Leave a Reply

Your email address will not be published.