As the economy slowly shows signs of recovery, many wonder what steps should be taken in order to speed things up. While some see a bright future ahead, other economists are concerned about a double dip recession.
“While maintaining appropriate prudence, lenders should do all they can to meet the needs of legitimate, creditworthy borrowers … Encouraging lending to small businesses that are well positioned to pay is a positive, not a negative, for the safety and soundness of our banking system.”
Bernanke made his comments amid numbers showing that loans to small businesses declined by 6% in the first quarter of 2010. In the first quarter of 2008, small business loans totaled $700 billion versus $660 billion this quarter. Bernanke was uncertain as to the exact cause of the decline, saying that it could be the result of a reduction in demand, or tightening credit in the face of the economic crisis.
Bernanke was critical of banks who made “mechanical, automatic rejections” based solely on industry, location or other negative factors. “We’ve still got a long way to go, but I’m hopeful that we’ll see improved conditions for credit going forward.” Bernanke said.
Related Resources:
- Fed Chief Urges Banks to Do More for Small Business (New York Times)
- Federal Reserve Discusses CARD Act, Credit Card Reform (FindLaw’s Free Enterprise)
- Federal Reserve Board (FindLaw’s LawBrain)
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