Federal Reserve Chairman Ben S. Bernanke said he’s concerned about the costs U.S. joblessness is imposing on the economy and that the central bank is telling field examiners to encourage lending to creditworthy businesses.
“One particularly difficult issue is the continued high rate of unemployment,” Bernanke said today at a forum in Detroit. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.”
Bernanke’s appearance in Michigan, where the 14 percent unemployment rate is the country’s highest, is part of a series of Fed gatherings around the nation to discuss small-business lending. Policy makers are seeking to encourage the flow of credit that would allow small companies to expand and hire, bringing down the jobless rate from close to a 26-year high.
“Our collective challenge is to help ensure that creditworthy borrowers have access to credit so that, should they choose, they can expand their businesses or increase payrolls, helping our economy to recover,” Bernanke said at the event at the Chicago Fed’s Detroit branch.
The Fed has kept the main interest rate close to zero since December 2008 to stoke job growth after the worst recession since the 1930s. In its statement in April, the Federal Open Market Committee repeated its view that “tight credit” is restraining consumer spending.
Outstanding loans to small businesses have declined to about $660 billion in the first quarter of this year from almost $700 billion two years ago, Bernanke said. It’s “difficult to answer” how much of the drop comes from declining demand and how much from supply, he said.
Next Meeting
Bernanke, 56, didn’t elaborate on the outlook for the U.S. economy or monetary policy. Fed policy makers next meet June 22- 23 in Washington.
Bernanke said he would offer “a little bit of guarded optimism” on lending.
“We’ve still got a long way to go but I’m hopeful that we’ll see improved conditions for credit going forward,” he said. “The Federal Reserve views this as being absolutely central to the recovery.”
Lockhart Comments
Separately today, Atlanta Fed President Dennis Lockhart said in a speech that the central bank, to avoid the risk of inflation, may eventually need to raise its target interest rate from near zero even with U.S. unemployment still high.
Bernanke said the central bank is training its bank examiners and giving them the “message that encouraging lending to small businesses that are well positioned to repay is positive, not negative, for the safety and soundness of our banking system.”
Last month Bernanke said the central bank is “extremely sensitive to the issue” of whether Fed examiners are compelling firms to be too conservative in lending to small businesses and startups.
“We take very seriously the need to balance appropriate prudence with making sure that creditworthy borrowers get the loans that they deserve,” Bernanke said today during a panel discussion.
Bernanke’s visit was part of recent efforts to see more of the U.S. economy outside Washington. Last month he toured a Philadelphia shipyard and snack-cake factory in a part of the city being redeveloped, and next week he is scheduled to visit a community college in Richmond, Virginia.
By Scott Lanman – businessweek.com
Add A Comment