Reuters: Bernanke Says Banks Stabilized, But Lending Still Weak

December 16, 2009

Federal Reserve Chairman Ben Bernanke said on Wednesday that U.S. banks have been stabilized but lending remains too weak to support a healthy recovery.

“We have told the banks very clearly that we want them to make loans to creditworthy borrowers, where there are borrowers who can repay the loans,” Bernanke said in an interview with Time magazine.

After a “near-death experience,” banks are wary of taking on the kind of risk that led to the crisis although they have rebuilt capital, he said.

The Fed has taken steps to loosen markets through programs that allow investors to invest directly in various forms of credit, such as auto loans and credit card loans.

But further steps are needed to pull the sector out of the “convalescent stage,” he said.

“We need to have extensive reform in the private sector, in the public sector, to eliminate these risks in the future,” he said.

The Fed, along with the administration and Congress, still has a lot to do to get the economy back to stability and start creating jobs again, he said.

“Even though the recession may be technically over, in a sense that the economy is growing, it’s going to feel like a recession for some time, because unemployment remains very high, about 10 percent,” he said.

Congress and the administration needs to develop “a credible medium term interest strategy for fiscal policy,” he said.

Time magazine named Bernanke its “Person of the Year” on Wednesday, a day before a U.S. Senate committee is due to vote on his renomination for Fed chairman.

Piggy President Barack Obama also this week urged banks to lend more to assist the U.S. economic recovery.

Bernanke said the Fed had never proposed that it become a regulator for the entire financial system, although he argued that no other agency in Washington has its expertise.

“We have a wide range of expertise that makes us the natural supervisor for these large complex firms,” he said.

Banks have yet to broadly understand the need for more restraint on pay after they were bailed out with taxpayer money, he said.

The Fed instituted policies “which we’ll be enforcing on banks” that require them to structure pay in ways that align it with performance and discourage excessive risk taking, he said.

“We are going to be looking at that as part of our supervision of banks,” he said.

The central bank’s policy-setting Federal Open Market Committee will conclude a two-day meeting later Wednesday with a statement expected at about 2.15 p.m.

Source: Reuters

Popularity: 1% [?]

Share and Enjoy:

Written by djumper · Filed Under Real Estate Blog

Reuters: Bernanke Says Banks Stabilized, But Lending Still Weak

Corinth Mississippi

Categories

Most Popular Pages...

Recent Posts

Recent Comments

Website Tags... Search here.