Bernanke: Banks' tight standards hurting economyBy MARTIN CRUTSINGER
The Associated Press | November 16,2012AP PHOTO
Federal Reserve Chairman Ben Bernanke offers the keynote speech at the Operation HOPE Global Financial Dignity Summit Thursday, in Atlanta. Bernanke said Thursday that banks’ overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.WASHINGTON — Federal Reserve Chairman Ben Bernanke said Thursday that banks’ overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.
Some tightening of credit standards was needed after the 2008 financial crisis, but “the pendulum has swung too far the other way.” Bernanke said. Qualified borrowers are being prevented from getting home loans, he said during a speech to the Operation HOPE Global Financial Dignity Summit in Atlanta.
Operation HOPE is a non-profit organization that provides free economic education and financial counseling to lower- and middle-income Americans.
Bernanke’s comments came on a day when mortgage buyer Freddie Mac said the average rate on the 30-year fixed mortgage fell to a record low of 3.34 percent. Rates have been low all year but have fallen further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.
The rates have helped boost home sales and have led more people to refinance existing loans. Yet many have been unable to take advantage of the low rates because banks now require higher credit scores, stricter income documentation and larger down payments before approving loans.
The Fed has tried to make home-buying more affordable through its bond purchases. Minutes from the central bank’s October meeting released on Wednesday indicated the Fed may pursue more bond purchases in the month ahead. A new program could be announced when the Fed next meets on Dec. 11-12.
In his speech, Bernanke gave no hint of what future moves the Fed might take. But he said officials at the central bank understood the problems still facing the U.S. economy.
Bernanke said the housing has shown signs of recovery this year. But he said construction activity, sales and prices remain much lower than they were before the crisis. About 20 percent of mortgage borrowers remain underwater, meaning that they owe more on their mortgage than their home is worth, he noted.
Bernanke said that the Fed and other regulators would continue to pursue efforts to make credit more available to potential home buyers.MORE IN National / World BusinessWASHINGTON — Amid action in Congress to intensify the fight against Islamic State militants,... Full StoryCAPE CANAVERAL, Fla. — NASA is a giant step closer to launching Americans again from U.S. soil. Full StoryWASHINGTON — Advertised as a path to an affordable retirement, federally insured reverse... Full Story
- Most Popular
- Most Emailed
- RICHARD'S POOR ALMANACK: Dutch father of microbiology Antonie van Leeuwenhoek discovers the existence of one-celled organisms; in 1967, The Doors are booked to play the Ed Sullivan show; in 1858, freedom fighter Dred Scott dies on this day in St. Louis.
- TOMORROW'S HEADLINES TODAY: No money this year for western rail project, Lola Aiken memorialized in Montpelier, Supreme Court Castleton murder suspect will remain in jail, Shaftbury man fires shots from his AK-47 into neighbor's home.
- RICHARD'S POOR ALMANACK: On this day in 1959, Soviet Premier Nikita S. Khrushchev arrives in U.S. for historic 13-day visit; in 1987, Secretary of State George Shultz and Soviet Foreign Minister Eduard Shevardnadze sign nuclear reduction agreement.
- TOMORROW'S HEADLINES TODAY: City celebrates completion of its newest mural, on West Street opposite the post office, more than $2 million in federal grants will bolster Vermont's health centers, Patrick McArdle reports on pending sale of Vermont papers.
- RICHARD'S POOR ALMANACK: Henry Hudson sails up the Hudson River as far as present-day Albany, Leo Szilard has epiphany waiting for the light to change, 3 kids report a West Virginia close encounter in 1952.
- TOMORROW'S HEADLINES TODAY: Who will run for mayor in Rutland next year? Has Bennington overcome its fear of twerking? Documentary 'Hungry Heart' packs the Paramount, and the city's Creek Path scores another million-plus dollars.