Bernanke: Financial System Strained But Undergoing Stabilization

By Courtney Ann Jackson- Talk Radio News Service

Financial conditions are strained but have improved, according to the Federal Reserve Chairman Ben Bernanke’s semiannual Monetary Policy Report to Congress.

“Today, financial conditions remained stressed, and many households and businesses are finding credit difficult to obtain. Nevertheless, on net, the past few months have seen some notable improvements,” Bernanke said Wednesday before the Senate Committee on Banking, Housing, and Urban Affairs.

Bernanke cited the narrowing spread of interest rates in short-term money markets, adding that equity prices are nearly beginning to recover to their levels from the end of last year. Bernanke also noted that the banks have raised “significant amounts of new capital.”

According to the Chairman, many of these improvements are due, in part, to policy actions by the Federal Reserve to encourage the flow of credit.

“Some banks are still short of capital, other banks are concerned about future losses, they’re concerned about the weakness in the economy and the weakness of potential borrowers,” said Bernanke. “Banks should be making loans to credit-worthy borrowers. It’s in their interest, the bank’s interest, as well as the interest of the economy and we’re working with banks to make sure they do that.”

During questioning, Bernanke explained to Committee members that consumer protection, transparency, and accountability continued to be priorities for the Federal Reserve.