By Vince Farrell, CNBC Contributor
The Chairman formally known as everybody's favorite Uncle Ben stepped before Congress and said the economic outlook was "unusually uncertain." Sorry, but it's always unusually uncertain. What's new about that? The market seemingly was waiting for him to say something magic, but the Fed is limited in it options. The Fed could stop paying interest on the roughly $1 trillion in deposits kept in their custody. Theoretically that would encourage the banks to loan more money since they no longer get paid by the Fed. But there has to be loan demand for loans to be made. Corporate America has close to $2 trillion in cash on their balance sheets and low interest rates are available in the credit markets if they want to borrow. They have no need of bank borrowings and the presence of so much instant liquidity shows they are reluctant to spend or hire. The other option open to the Fed to stimulate the economy would be to resume buying bonds in the open market. The Fed has bought $1.25 trillion of mortgage backed bonds in an effort to stimulate the housing market. Housing is still moribund and there is no reason to think that pumping more liquidity into the market would do anything. Where help is needed is at the small business level. Small business owners are finding it beyond difficult to get credit. Part of the explanation lies in the fact that many small business loans are collateralized by the personal assets of the owner(s) , often by their homes. With asset prices so low, it's hard to qualify for a loan.
| More from CNBC What Does Wall Street Really Want From Bernanke? |
10 Positives to Battle a Downbeat Bernanke
Positive Economic Sign? Americans Moving Again