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Bernanke calls for more lending to lower-income areas

/ Source: news services

Federal Reserve Chairman Ben Bernanke is calling for more lending to people and small businesses in lower-income neighborhoods, saying they've been hurt disproportionately by the worst recession since the 1930s.

Bernanke says at Fed conference on community development that many of the nation's poorer communities were struggling before the downturn.

Bernanke says the national economy is growing at a moderate pace and that job creation is gradually improving, repeating comments made earlier this week at a news conference after the Fed's policy meeting.

Still, Bernanke warns: "Our economy is far from where we would like it to be, and many people and neighborhoods are in danger of being left behind."

Lending to creditworthy people and small businesses in troubled communities can stimulate economic activity that can generate local tax revenues, he noted.

Tax revenues can then be spent in the community redeveloping vacant properties, training people for new jobs, or on other economic development programs. That leads to more hiring and paychecks that can help poor homeowners avoid foreclosure, he said.

The Fed earlier this week said it will see its $600 billion bond buying program, launched in November to spur a sluggish recovery, through to its planned conclusion at the end of June.

The world's largest economy grew at a sluggish 1.8 percent annualized rate in the first three months of the year, but unemployment is still at a lofty 8.8 percent.

The depressed housing market is holding back the economic recovery, Bernanke said. Home foreclosure rates remain high and many families find themselves owing more for their homes than the homes are worth.

"Obviously, the problems in the labor market and the housing market are not unrelated," he said.