WASHINGTON (MNI) – The following is an excerpt from Federal Reserve
Chairman Ben Bernanke’s press conference Wednesday.
QUESTION: Are you at all concerned Operation Twist could affect the
ability of banks earning and their lending ability? Does it undercut
your ability to increase credit to consumers?
BERNANKE: No, I don’t think so. I have heard the argument by
lowering interest rates, you make it unattractive to lend. I don’t think
that is quite right. What we are lowering is the safe interest rate, the
Treasury rate, that should make it even more attractive for banks,
rather than to hold securities, to look for borrowers and to earn the
spread between the safe rate and what they can earn by lending to
households and businesses.
So I think macro-policy and monetary policy can in fact support
lending. Now the question arises in some context whether there are
other barriers to lending, as exists for example in some parts of the
mortgage market.
But lower interest rates on securities and other types of assets,
all else equal, would induce banks to look for higher yielding returns
higher yielding assets in the form of loans to households and
businesses.
** MNI Washington Bureau: 202-371-2121 **
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