Friday, November 16, 2012

Are Pessimistic "Animal Spirits" Still Hurting The Economy?

Ben Bernanke seems to think so. See Bernanke: Banks' tight standards hurting economy.
"Federal Reserve Chairman Ben Bernanke says banks' overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes. Bernanke says some tightening of credit standards was needed after the 2008 financial crisis. But he says “the pendulum has swung too far the other way.” He says some qualified borrowers are being prevented from getting home loans. Bernanke comments to an audience in Atlanta came on a day when it was reported that 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."

1 comment:

Anonymous said...

So mortgage bonds appear to have an inverse relationship with interest rates. Perhaps these lending standards are practical and will stop the unaware from sinking in waters which may be too deep for them to swim.