12 July 2010 19:34 [Source: ICIS news]
WASHINGTON (ICIS news)--The US economic recovery is threatened by continuing tight credit conditions facing the country’s small businesses, Fed chairman Ben Bernanke said on Monday, warning that private banks must do more to make funds available.
Speaking at a special meeting of small business interest groups and federal trade and financial agencies, Bernanke said that “Making credit available to sound small businesses is crucial to our economic recovery and so should be front and centre among our current policy challenges”.
He said the recovery is threatened because if small businesses cannot get loans to maintain operations or expand, US unemployment figures are not likely to improve and consumers will remain uneasy about their own job security and unwilling to spend.
“Small businesses are central to creating jobs in our economy,” Bernanke said, “they employ roughly one-half of all Americans and account for about 60% of gross job creation.”
“Newer small businesses, those less than two year old, are especially important,” he said, because “over the past 20 years, these start-up enterprises accounted for roughly one-quarter of gross job creation even though they employed less than 10% of the workforce.”
“The formation and growth of small businesses depends critically on access to credit,” Bernanke noted, adding: “Unfortunately, those businesses report that credit conditions remain very difficult.”
Bernanke, who heads the Federal Reserve Board, the ?xml:namespace>
He said that the sharp multi-year decline in
As a sort of self-perpetuating crisis, Bernanke noted that as the value of business owners’ personal property has fallen and the asset value of their businesses and equipment has declined, their ability to qualify for or collateralize loans has diminished still further.
Housing and automobile parts manufacturing are key downstream consuming sectors for the
“Clearly, to support the recovery, we need to find ways to ensure that creditworthy borrowers have access to needed loans,” the Fed chairman said.
He urged the nation’s private banks to “do all they can to meet the needs” of small businesses, and he said the Fed would increase its outreach to lenders and would direct banking regulators to help facilitate business loans.
But Bernanke also noted that local lenders that took part in the 40 meetings across the country argued that “current lending conditions don’t represent credit tightening as much as a return to more traditional underwriting standards following a period of too-lax standards”.
“The challenge ahead for lenders will be to determine how to assess the credit quality of businesses in an uncertain and difficult economic environment,” Bernanke said.
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|