By Steven K. Beckner

(MNI) – Federal Reserve Chairman Ben Bernanke kept his emphasis on
“still-difficult economic conditions” and market “uncertainties” in a
speech to community bankers Wednesday.

Bernanke, in remarks prepared for delivery to a meeting of the
Independent Community Bankers of America in San Diego, said the nation’s
smaller banks were hit hard by the financial crisis and recession and
said that, while they are recovering, they will need more time to repair
their balance sheets.

Bernanke avoided monetary policy and, for the most part, the
economic issues buffeting policymakers. But he did make glancing
reference to continued problems facing the United States and its banks.
He made no mention of inflation.

“Community banks face substantial challenges in the months and
years to come, including still-difficult economic conditions, continued
uncertainties in real estate and other key markets, and a changing
regulatory environment,” he said at the conclusion of his speech.

Earlier, Bernanke addressed the ongoing difficulties of the
thousands of smaller U.S. banks and their customers.

“Tthe financial crisis and its aftermath have hit some community
banks especially hard, and those institutions will continue to need time
to repair their balance sheets,” he said.

“Although we are not yet where we would like to be, the good news
is that many community banks are recovering and reporting stronger
performance,” Bernanke continued. “Indeed, despite some of the worst
economic conditions since the Great Depression and their own strained
balance sheets, community banks have already been doing their part to
meet the credit needs of their customers, notably including small
business customers.”

Bernanke added that the Fed itself has “been spending a lot of time
… trying to understand and promote lending to small businesses.”

In other comments, Bernanke revisited the issue of
“too-big-to-fail” financial institutions, suggesting that he is not
fully comfortable with how various regulatory reform efforts have dealt
with that issue.

“A financial system dominated by too-big-to-fail firms cannot be a
healthy financial system,” he said.

Bernanke said the Fed is trying to tackle “too-big-to-fail,”
pursuant to the Dodd-Frank Act, by “developing more stringent prudential
standards” for the largest banks and financial firms and by enforcing
“checks on the growth by acquisition of our major financial firms.”

The Fed chief said the crisis showed that “the government must not
be forced to choose between bailing out a systemically important firm
and having it fail in a disorderly and disruptive manner.”

And so he said the Dodd-Frank Act provided tools for unwinding
“systemically important” financial firms that become insolvent.

However, he added, “Resolving a large, multinational financial firm
safely will likely always be a difficult challenge, and a great deal of
work remains to be done to make these new authorities fully effective.”

** Market News International **

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