It is hard for domestic monetary policy to offset such effects, both because they are external in nature and because it is unclear how long they will dampen the U.S. recovery. One thing is for certain: Given the effects of banking crises on economic recoveries and the interconnectedness of financial markets, it is imperative that our European partners resolve their banking issues if we are to sustain a prolonged economic upturn. BIS central bankers’ speeches  5  This is not to say that the Federal Reserve has no role to play. Our franchise includes assuring an efficient financial transmission mechanism. For example, everyone acknowledges that small business is the originator of jobs and the incubator of our nation’s prosperity. In addition to wanting to see the whites of the eyes of growing final demand, needing clarity on fiscal policy and wanting regulatory relief, many of the small businesses that Dunk [Bill Dunkelberg] represents – and others that we survey – will need better access to the abundant and cheap liquidity the FOMC has made possible. Small businesses turn to community and regional banks for credit; their credit activity does not move the needle on the dashboards of the megabanks. It is incumbent on the Fed and other bank regulators to reduce the regulatory burdens that are inhibiting – indeed, overwhelming – community bankers whose business it is to lend to creditworthy small businesses. This is a supervisory and regulatory matter, not a matter of general monetary policy.
The 1.1 percentage-point gap we’ve seen between Texas and national job growth over the current recovery corresponds almost exactly to the long-run (40-year) historical gap between our growth rate and the nation’s. The shortfall in jobs at the national level is but one indicator of the pervasive anguish of American households since the Panic of 2008. Another sign of that anguish is that average real per capita net worth in the United States has not regained the losses incurred in the latter part of the last decade. At the end of the first quarter of 2011, average per capita net worth was nearly 14 percent below the peak seen four years earlier. Real income has not fared as badly, but per capita salary income is, nevertheless, almost 2 percent below its peak in the first quarter of 2008. A likely widening of income dispersion over the period, however, suggests that median income has probably fared worse. We will get a better read on this when the Federal Reserve Board completes it triennial Survey of Consumer Finances early next year. I do not expect that survey to paint a pretty picture. I am most aware, as are many of you, that if history is any guide, getting back to where we were will be no small task. The 2008–09 recession was precipitated by a banking crisis.