Bernanke: Banks, consumers need to do more to spark economyBy WALTER C. JONES
Morris News Service
COLLEGE PARK, Ga. — Banks, consumers and private organizations need to do more to get the economy going, Federal Reserve Chairman Ben Bernanke said Thursday at a speech to a people attending a conference on the poor.
Bernanke stressed that the poor are hurt worse when the economy declines, noting that home ownership dropped more in poor neighborhoods as a result of the last recession.
He acknowledged that the current economy has left some people without jobs or job security. But with mortgage rates historically low and home prices still attractive to buyers, there should be more activity in the housing market.
Bankers have told the fed they aren’t lending more because of a combination of factors, from nervousness about the economy to government regulations. But they haven’t complained of a lack of money or a general unwillingness, he said.
So, the problem must be their credit standards.
Those standards needed to be tightened compared to what they were leading into the recession, he said, when people were able to get mortgages they couldn’t afford.
“However, it seems likely at this point that the pendulum has swung too far the other way, and that overly tight lending standards may now be preventing creditworthy borrowers from buying homes, thereby slowing the revival in housing and impeding the economic recovery,” he said.
According to Bernanke, the Fed is doing its part to provide liquidity, stabilize the economy and restructure regulations where possible. In September, it issued a statement vowing to continue downward pressure on long-term interest rates.
He also offered a veiled threat against banks that discriminate against the poor, either by redlining neighborhoods or simply charging them more.
“The Federal Reserve has been vigilant in identifying and stopping such abuses, and we remain committed to vigorous enforcement of the nation’s fair lending laws,” he said.
The conference, billed as the Global Financial Dignity Summit, was sponsored by Operation HOPE, a 20-year-old, national organization that teaches money management to students and residents of low-income neighborhoods.
Bernanke called for other organizations, including the corporate side of the financial community, to step up efforts to increase financial literacy to guide people from making bad decisions and to build wealth that will cushion them against future recessions and lead their families out of poverty.