The state of the U.S. banking system has "improved significantly" since the collapse of Lehman Brothers in the fall of 2008, but lending standards remain too tight, according to Federal Reserve Board chairman Ben Bernanke.
The Fed chief told a conference of southern leaders and legislators that loan losses seem to be peaking and bank capital ratios are rising.
"However, many banks continue to have a large volume of troubled loans and bank lending standards remain tight," said the central banker. "With credit demand weak, and banks writing down problem loans, bank loans have continued to decline."
Investors in the secondary market for nonperforming mortgages continue to cite instances where large banks that hold NPLs will not sell the notes at true market values. As reported by National Mortgage News, very few large NPL auctions are taking place unless the Federal Deposit Insurance Corp. is involved.n
The Fed chief Monday morning noted that the housing sector continues to be a restraint, holding back the economic recovery. "The housing market has remained weak, with the overhang of vacant and foreclosed houses weighing on home prices and new construction," he said.
"Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels and shopping malls." Bernanke spoke Monday morning at the Southern Legislative Conference of the Council of State Governments in Charleston.
