PORTSMOUTH, N.H. - Richard Syron, president of the Federal Reserve Bank of Boston, said the economic recovery has been lagging behind his expectations, and banks are being hit with a new wave of competition.
Questioned before he delivered the keynote address at the annual conference of the Northeastern Business and Economics Association, Mr. Syron said the recovery is being slowed by a series of unprecedented economic transitions.
"Things like cuts in defense spending, things like trade and international competition and even health care, are not just cyclical issues. There are fundamental realignmeni issues going here."
"We don't have a lot of experience with this many transitions, and it's going to take a lot of time," he said.
Mr. Syron also expressed doubts that "banks are ever going to return to doing a very large amount of lending with very large companies."
"It used tokbe that banks originated half the credit in the economy," he noted. "Now, it's down to a quarter.
"Carmakers can finance car sales. Appliance stores will finance their saley.... Some very large companies have loaned more to banks than they have borrowed.... That's a dramatic change."
The Fed president said, however, that banks' long-term survival depends on their getting back into business lending.
