Catherine Clifford
CNN Money
July 12, 2010
(NEW YORK) — In the last two years, $40 billion worth of loans to small business loans have evaporated, and correcting the problem should be “front and center among our current policy challenges,” said Ben Bernanke, chairman of the Federal Reserve, in a speech Monday.
Loans to small businesses dropped from more than $710 billion in the second quarter of 2008 to less than $670 billion in the first quarter of 2010, according to bank financial reports submitted to the Federal Financial Institutions Examination Council.
Bernanke, who was speaking at the day-long forum “Addressing the Financial Needs of Small Businesses” at the Federal Reserve, said that there are several factors behind the contraction in small businesses lending.
He cited weaker demand from Main Street businesses worried about taking on more debt during tough times, “deterioration in the financial condition of small businesses during the economic downturn,” and a lack of supply of available credit.