Romer Speaks to Credit Supply and Demand
Rep. Carolyn Maloney (D-N.Y.) filed this guest blog post.
Yesterday's hearing was the first of two that the Joint Economic Committee is holding on "The Economic Outlook." Next Tuesday, May 5th, Federal Reserve Chairman Ben Bernanke will testify before the committee.
Yesterday, the chair of the president's Council of Economic Advisers, Dr. Christina Romer, presented interesting testimony about the recent declines in consumers’ and businesses’ willingness to spend -- the key to our recovery. The loss of wealth caused by the large decline in the stock market and drop in house prices has made consumers more skittish about spending. And with products sitting on shelves, why should businesses be in any rush to ramp up production or invest in any new equipment?
An interesting part of Romer’s testimony was her discussion of the effects of both supply and demand for credit on lending. According to her, the decline in lending is only partly due to a decline in the supply of credit by banks.
Romer pointed out that while much of the decline in lending is due to reductions in the supply of credit, the demand for credit has also declined because consumers and businesses are reluctant to spend.
The policy prescriptions for declines in demand are different than the prescriptions for supply declines. Declines in demand for credit can be addressed through predatory lending legislation, such as my Credit Cardholders’ Bill of Rights which overwhelmingly passed the House of Representatives yesterday, or through health care policies to reduce consumer fears about health care expenditures in the future.
I look forward to hearing Chairman Bernanke's perspectives on this issue, and many others, at next week's JEC hearing.
--Rep. Carolyn B. Maloney (D-N.Y.) is chair of the Joint Economic Committee.
Posted by: Indy2009 | May 1, 2009 2:44 PM | Report abuse
Posted by: DesolationRow | May 1, 2009 8:25 PM | Report abuse
Posted by: pimpinbenzo73 | May 4, 2009 2:35 PM | Report abuse
The comments to this entry are closed.