Ben Bernanke at a luncheon in May 2010. (Reuters/Tom Mihalek)
Associated Press | Federal Reserve Chairman Ben Bernanke said Thursday that even though the
U.S. economy has been expanding for almost a year now, the persistently
high unemployment rate remains an important concern.
Speaking in Detroit at a meeting of Michigan’s small business community,
Bernanke said the Fed has been urging banks to lend to creditworthy
small firms, which play a key role in creating jobs and improving
employment security.
“One particularly difficult issue is the continued high rate of unemployment,” Bernanke said in the text of his remarks. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.”
Nonfarm payrolls likely increased sharply in May as the U.S. economy continued to grow, the government’s monthly jobs report, due out Friday, is expected to show. But most of the gains are seen coming from the hiring of temporary workers for the Census count. Moreover, the increase probably wasn’t strong enough to significantly bring down the unemployment rate from the 9.9 percent rate seen in April.
Showing concern for the drop in lending to small companies, Bernanke noted how outstanding loans to small businesses have declined from almost $700 billion in the second quarter of 2008 to around $660 billion in the first quarter of 2010.
The Fed chief said it was difficult to know how much of this reduction has been driven by weaker demand for loans from small firms and how much by tight bank lending conditions.
Whatever the reason, the Fed is trying to ensure that small firms that deserve it get the credit they need.
The Fed has been conducting “extensive training programs” for its bank examiners, with the message that encouraging lending to small businesses that are well positioned to repay is positive for the safety and soundness of the banking system.
The majority of U.S. banks kept the bar high for borrowers in the first quarter of the year on continued weak demand for loans, a Fed quarterly survey showed last month. A small portion even tightened loan terms further. Big banks eased some standards on commercial and industrial loans — but it was to large firms.
The Fed chief took a similar message about the need to lend to small creditworthy firms at a meeting in Philadelphia May 13 on rebuilding local communities.
Thursday Bernanke didn’t comment on the U.S. monetary policy outlook in his prepared text for Detroit. He’s due to participate in a discussion with small businesses in the automobile industry, beginning at 1 p.m. EDT.
