Credit Easing in US, Fed Chairman Says

“Notwithstanding the various headwinds, credit conditions in the United States have improved significantly in a number of areas,” Mr. Bernanke said.

He said that large companies were selling bonds at historically low interest rates and that people with strong credit had “ready access” to credit card and auto loans.

But, he also noted, many creditworthy Americans were finding it difficult to get mortgage loans. Small-business owners who have used their homes as collateral for loans also face “challenging” conditions, he said.

Mr. Bernanke’s comments were prepared for delivery at a banking conference in Chicago.

The Fed chairman said that banks had made “considerable progress” in shedding risk from balance sheets and building cushions against future loan losses. Cash and securities holdings at large banks have doubled since 2009, he said.

He also said that the way banks finance themselves had become safer. Large banks are now “flush” with deposits, he said, and depend less on short-term loans from financial institutions for their borrowing needs.

In the financial crisis in the fall of 2008, much of the lending among financial institutions in this so-called wholesale funding market froze, spreading panic and helping push the economy into its deepest recession since the Great Depression.

Mr. Bernanke noted that most of the 19 largest banks passed “stress tests” earlier this year, meaning they would probably survive and be able to lend in a financial crisis worse than 2008.

In those tests, regulators supposed the unemployment rate would spike to 13 percent, stocks would drop by half and home values would drop by more than a fifth.

Mr. Bernanke said loans to homeowners had fallen 13 percent from their peak, after adjusting for inflation. A slow economic recovery, a troubled housing market and caution by lenders mean that situation is unlikely to improve quickly, he said.

Turning to small businesses, Mr. Bernanke said small loans from banks, though increasing, were still 15 percent below their 2008 peak at the end of last year.

In response to criticism that heightened scrutiny by regulators has made it difficult for banks to lend, Mr. Bernanke said the Fed had emphasized to supervisors on its staff that they should take a “balanced approach” in overseeing banks.