Bernanke: Lending Terms ‘Generally Less Restrictive’

Federal Reserve Chairman Ben Bernanke said lending terms and standards have become less restrictive over recent quarters, but small businesses and potential home buyers with “less-than-perfect” credit are still having problems getting loans.
In prepared remarks for Congressional testimony today, Bernanke also said the central bank is prepared to take action if needed to further boost the economy, but made no commitments.
The Fed chief was mostly positive in his assessment of the lending industry.
Banking and financial conditions in the United States have improved significantly since the depths of the crisis, he said.
“Lending terms and standards have generally become less restrictive in recent quarters, although some borrowers, such as small businesses and potential home buyers with less-than-perfect credit, still report difficulties in obtaining loans,” Bernanke said.
The prolonged economic recovery and still depressed housing market have kept many borrowers on the sidelines at a time when home affordability is at historically favorable levels.
“Many prospective home buyers cannot obtain mortgages, as lending standards have tightened and the creditworthiness of many potential borrowers has been impaired,” the Fed chief said.
In additional, a large stock of vacant houses continues to limit incentives for the construction of new homes, while a backlog of foreclosures will add further to the supply of vacant homes.
But Bernanke also said there are a few encouraging signs in the housing market, including a jump in sales and construction, improvements in home-builder sentiment, and the apparent stabilization of home prices in some areas.
Recent stress tests by the Federal Reserve on the balance sheets of the 19 largest U.S. banks showed that the banks have added about $300 billion to their capital since 2009, he said. The tests also showed these institutions can withstand extremely adverse hypothetical economic scenarios.
Most of those firms would be able to provide credit to U.S. households and businesses under these scenarios, Bernanke said.

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