Don't count out banks, says Bernanke

Borrowers are turning to other financial service providers to get capital, but don’t expect banks to die out any time soon, Federal Reserve Chairman Ben Bernanke said today. “Banks do continue to play a central role in credit markets,” he said at a monetary policy conference in Atlanta. “Because of the burgeoning market for loan sales, banks originate considerably more loans than they keep on their books.” Mortgage providers and venture capitalists have access to funding through capital markets, but unlike banks they don’t have access to insured deposits. Also, the cost at which these lenders raise capital depends on a set of financial conditions such as their net worth and liquidity, so economic changes and monetary policies can affect premiums and lending rates, Mr. Bernanke pointed out. The possibility of expanding bank lenders’ monetary policies to private credit providers is worth investigating, he said.