Fed

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But he said the unprecedented government assistance to financial firmw has createda “moral of heightened expectations about how much the government will protect market s from their own “My reading of current conditions is that bank lendinh is constrained more now by the supply of credit-worthyt borrowers than by the supply of bank capital,” Lackefr said at he ’s annual economic outlook forum in That could explain why the Fed’ss expanded lending to banks and the ’ss investments in banks have not led to a big spikew in bank lending, he added.
Lacker expects a botto m in housing constuction, falling energy prices and rock-bottom interest ratesd will fuel the beginning ofa U.S. economic recoveru in the second half of this He warned, however, that “this is the thirrd straight year in whichg I’ve picked a bottom in the housinv market. So I do so with more than the usua dollopof humility.” Lacker said the housing market’ws troubles may have been fueled by a beliefr that government would come to the rescue if there was a majotr shock to the housinbg market.
Over the past year, that beliet may have led companies to turn down investments or merger proposal s because they thought they could get a better deal when governmenttswooped in, Lacker said. Conversely, investorz may have demanded stiffer returne on deals because they feared a floo of government money would dilute their The breadth of government suppor t to banks has extendedx beyond the reach of the bankregualtory system, Lackeer said. “I take it as given, therefore, that the scop e of the financial safety net must ultimately berolled back,” Lacker said. It was a heavgy discussion for theluncj hour.
But about 500 bankers and retailers hungon Lacker’s wordws for clues about what the year to come wouldd mean for their businesses. The crowd was doublwe that of a similafr MBA economic forum held ayear ago.