Bernanke urges jump in lending for poorer areas
WASHINGTON — Federal Reserve chairman Ben Bernanke yesterday called for more lending to people and small businesses in lower-income neighborhoods, saying they’ve been disproportionately hurt by the recession.
Many of the nation’s poorest communities were struggling before the downturn, Bernanke said at the Fed conference on community development in Arlington, Va.
The recession officially ended two years ago. Bernanke said the national economy is growing at a moderate pace and that job creation is gradually improving, repeating comments he made earlier this week at a news conference after the Fed’s policy meeting.
But the unemployment rate remains high. For many poor and working-class Americans, it doesn’t feel like a recovery.
“Our economy is far from where we would like it to be, and many people and neighborhoods are in danger of being left behind,’’ Bernanke said.
Lending to creditworthy people and small businesses in troubled communities can stimulate economic activity that can generate local tax revenues, he noted.
Tax revenues can then be spent in the community redeveloping vacant properties, training people for new jobs, or on other economic development programs. That leads to more hiring and paychecks that can help poor homeowners avoid foreclosure, he said.
Bernanke noted lower-income households fell behind on their debt payments at a much higher rate than those with higher incomes. They were also more likely to lose jobs during the recession.
Lost income from unemployment is causing families to fall behind on their mortgage payments, Bernanke said.
A wave of foreclosures has led to more vacant homes in neighborhoods. That’s further depressed home values, attracted crime and created financial burdens for local governments, Bernanke said.
He said the crippled housing market is holding back the economic recovery. Even though the unemployment rate has dropped to 8.8 percent, a full percentage point from November, it still remains high by historical standards.
“Until vulnerable families and troubled communities have regained lost progress, the economic recovery will remain incomplete,’’ Bernanke said.