Fed ponders solution to growth, credit gap
Federal Reserve Board Chairman Ben Bernanke testifies before the Joint Economic Committee on Capitol Hill June 7, 2012 in Washington, D.C. The Federal Reserve faces sluggish growth and a dilemma: Low interest rates aren’t benefiting many needy consumers who have blemished credit.
Kai Ryssdal: The last best hope for the American economy meets tomorrow.
OK, that's kind of a subjective rendering of the Federal Reserve get together that starts in the morning. But Mr. Bernanke and company are doubtless feeling the pressure. The markets have been unsettled of late. Europe is Europe still. Our economy is shaky. Congress can barely agree to disagree.
So what's the Fed to do? It's already brought interest rates about as low as possible. And that's still not helping people who really need cheap money right now. Marketplace's Sarah Gardner has more about life on the wrong side of the credit gap.
Sarah Gardner: Willow Elliott would really like to spend money and boost the American economy. She’s got a stable job, makes about $40,000 a year and pays her bills on time. But this divorced grandmother says her credit union turned her down for an $8,000 car loan at an interest rate of 2.99 percent.
Willow Elliott: I was told that I needed to wait one more year before they would look at me as not being a credit risk.
The black mark on Elliott’s record? A condo foreclosure that knocked her stellar FICO score down into the low 600s. It’s gone back up since but not enough, apparently, to satisfy today’s nervous lender. Elliott just hopes her 1992 Toyota Corolla doesn’t die on her in the meantime.
Elliott: I have to keep it. And I don’t want to take money out of my 401(k) which has been really faltering lately with the market also. I’m kind of worried about that.
No matter what Fed officials decide in Washington tomorrow, it’s probably not going to help Willow Elliott buy the used Prius she’s after. Banks are still skittish about lending to anyone with any financial hiccups.
Economist Adolfo Laurenti at Mesirow Financial.
Adolfo Laurenti: And that has really resulted in this credit gap where the less risky borrower, who tend to be the affluent people, can still get the money that they probably do not need.
Like a cheaper mortgage. Economists say those folks will likely pocket the money they’ve saved instead of shopping for things like cars. The kind of spending that stimulates a lethargic economy.
I’m Sarah Gardner for Marketplace.