Federal Reserve Chairman Ben Bernanke said Thursday that many businesses and consumers are finding it easier to borrow as banks shore up their balance sheets.
"Notwithstanding the various headwinds, credit conditions in the United States have improved significantly in a number of areas," Bernanke said.
He said that large companies are selling bonds at historically low interest rates and that people with strong credit have "ready access" to credit card and auto loans.
But he also noted that many creditworthy Americans are finding it difficult to get mortgage loans. He said small business owners who have used their homes as collateral for loans also face "challenging" conditions.
Bernanke's comments were prepared for delivery at a banking conference in Chicago.
The Fed chairman said that banks have made "considerable progress" in shedding risk from balance sheets and building cushions against future loan losses. Cash and securities holdings at large banks have doubled since 2009, he said.
He also said that the way banks fund themselves has gotten safer. He said large banks are now "flush" with deposits and depend less on "short-term loans" from financial institutions for their own borrowing needs.
In the financial crisis in the fall of 2008, much of the lending among financial institutions in this so-called wholesale funding market froze, spreading panic and helping push the economy into its deepest recession since the Great Depression.
Bernanke noted that most of the 19 largest banks passed "stress tests" earlier this year, meaning they would likely survive and be able to lend in a financial crisis worse than 2008.
In those tests, regulators supposed the unemployment rate would spike to 13 percent, stocks would drop by half and home values would drop by more than a fifth.
Bernanke said loans to U.S. homeowners have fallen 13 percent from their peak, after adjusting for inflation. He said a slow economic recovery, a troubled housing market and caution by lenders mean that situation is unlikely to improve quickly.
Turning to small businesses, Bernanke said small loans from banks, though increasing, were still 15 percent below their 2008 peak at the end of last year.
In response to criticism that heightened scrutiny by regulators has made it difficult for banks to lend, Bernanke said the Fed has stressed to supervisors on its staff to take a "balanced approach" in overseeing banks.
In a news conference following a two-day policy meeting last month, Bernanke listed "credit tightness" among several factors holding back economic growth. He expressed hope that those conditions would soon improve.
To spur borrowing and stimulate the economy, the Fed has been selling short-term Treasurys and buying long-term ones in a maneuver known as Operation Twist.
Buying long-term bonds helps push their prices up and their yields down. Since many loans are tied to Treasurys, lower yields can mean lower interest rates for consumers and businesses. The bond-buying program ends in June.