elizabeth a duke : small business credit – next steps speech by ms elizabeth a duke, member of the board of governors of the federal reserve, at the federal reserve meeting series : “ addressing the financing needs of small businesses ”, washington dc, 12 july 2010. * * * good afternoon. i want to thank all of you for participating in today ’ s discussion about the financing needs of small businesses. i particularly want to thank karen mills, the small business administration ( sba ) administrator, for her remarks and our distinguished panelists for helping us to better understand the dynamics of small business lending in these difficult economic times. i would also like to thank everyone who participated in the more than 40 regional meetings that led up to today ’ s conference and to thank the reserve banks for their sponsorship and organization of those meetings. they brought together small businesses, lenders, technical assistance providers, bank examiners and others involved in small business credit to help identify barriers to small business credit access and to suggest potential solutions. as many of you know, i came to the federal reserve after many years as a community banker. quite a number of those years were spent lending to the small businesses that were the backbone of my local economy. that experience gives me a deep appreciation for the importance of credit to economic growth and the particular importance of small business lending to job creation in local communities. so, as you might imagine, the recent decline in availability of credit to small businesses concerns me. it also concerns my colleagues across the federal reserve system. when the mortgage crisis first broke a few years ago, we were able to build a body of data and an understanding of relevant issues through a series of meetings convened by the federal reserve banks across the country on topics such as foreclosure or neighborhood stabilization. as we started hearing more about problems encountered by small businesses in accessing credit, we again tapped the broad footprint of the reserve bank system and the web of local contacts they have developed to help us better understand the issues surrounding loans to small business. i attended one of the regional meetings in june and was pleased to see firsthand the quality of the conversation that took place. today we have seen evidence that the conversations were equally rich across the country. the information gathered through this kind of outreach is invaluable as we consider our policy options, and i hope that you have found it similarly helpful. today ’ s agenda was organized around the common issues identified in those regional meetings. we looked at small business credit issues from

##m model. stimulative fiscal policies such as these could be beneficial if the economy confronted a recession. of course, it would be important to ensure that any fiscal policy changes during a recession did not compromise long - run fiscal sustainability. government policies that boost the economy ’ s long - run growth rate would be an even better means of raising the equilibrium interest rate. this is a point i have also made in the past. 14 while there is disagreement about what the most effective policies see, for example, kocherlakota ( 2015, 2016 ) and summers ( 2016 ). for instance, in fischer, 2016. - 10 would be, some combination of more encouragement for private investment, improved public infrastructure, better education, and more effective regulation is likely to promote faster growth of productivity and living standards - - and also to reduce the probability that the economy and, particularly, the central bank will in the future have to contend with the effective lower bound. in summary, a variety of factors have been holding down interest rates and may continue to do so for some time. but economic policy can help offset the forces driving down longer - run equilibrium interest rates. some of these policies may also help boost the economy ’ s growth potential. - 11 references aaronson, stephanie, tomaz cajner, bruce fallick, felix galbis - reig, christopher smith, and william wascher ( 2014 ), “ labor force participation : recent developments and future prospects, ” brookings papers on economic activity ( fall ), pp. 197 - 255, www. brookings. edu / ~ / media / projects / bpea / fall2014 / fall2014bpea _ aaronson _ et _ al. pdf. board of governors of the federal reserve system ( 2016 ), “ federal reserve board and federal open market committee release economic projections from the september 20 - 21 fomc meeting, ” press release, september 21, https : / / www. federalreserve. gov / newsevents / press / monetary / 20160921b. htm. carvalho, carlos, andrea ferrero, and fernanda nechio ( 2016 ). “ demographics and real interest rates : inspecting the mechanism, ” working paper series 2016 - 05. san francisco : federal reserve bank of san francisco, april, http : / / www. frbsf. org / economic - research / files / wp2016 - 05. pdf. fernald