Banks must fuel economic engine
- Portland Tribune - Opinion
Federal Reserve Chairman Ben Bernanke got it right Monday when he told the nation's banks that it's time to provide increased lending to small businesses to support improvement of the national economy.
Unfortunately, our state and nation's economic recovery is iffy at best.
Oregon's bankers should hear, and respond to, Bernanke's message. The largest of these banks - including Wells Fargo, U S Bank, Bank of America and Key Bank - are all multi-state institutions whose corporate policies on lending are determined in offices far from here.
An opportunity for straight talk about Oregon's economy and what should be done to make things better occurs on July 28 in Portland, when board members of the Federal Reserve Bank of San Francisco meet with Portland-area business leaders to take stock of regional economic conditions.
The easily conveyed message is that the economy is better than it was a year ago when unemployment stood at 11.6 percent, but the recovery is spotty and its durability is not at all certain. As of June, unemployment in Oregon remained at 10.5 percent. That's a slight improvement from May's figure of 10.6 percent, but the rate has not changed significantly during the past eight months. Meanwhile, the number of Oregonians claiming unemployment benefits rose by 17 percent from May to June.
These are not just statistics. These numbers represent 174,000 people in need of jobs. Oregon's small businesses are one place - and an important one - to find work.
We understand that success in business requires more than an ability to obtain a loan. But we also know that many solid companies are being held back because they lack access to investment capital and to short-term lines of credit that aid day-to-day operations.
Locally and across the nation, banks can do their share to aid small businesses and advance the recovery by taking a hard look at credit policies. Each bank should use a test that measures whether loan policies are contributing to or inhibiting their customers' performance.
The Federal Reserve Board and federal regulators have a job to do as well. Regulators have forced banks to keep more funds in reserve to protect against loan losses that might endanger banks. On the surface, this is prudent financial policy. Yet we hear from many businesses that they believe these tighter policies are an overreaction to years of laxness in banking regulations, and that the new rules are making it very tough for small businesses to invest incrementally in their operations.
Given that most small businesses are extremely cautious about overreaching, we suspect that any changes in how banks manage credit will assist in
a slow, but healthy improvement for small-business performance. What follows will be greater economic momentum, more jobs and improved consumer confidence.