ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
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And I'm Melissa Block.
The threat of a double dip is a big topic at the Federal Reserve Summer Symposium this week. The setting is relaxed in Jackson Hole, Wyoming. But there is concern that the economic recovery is fading and the U.S. could slide back into recession.
Recent economic data suggests the housing market is already doing just that. Fed chairman Ben Bernanke speaks tomorrow and investors and economists hope he will signal new action to shore up the economy.
NPR's John Ydstie reports.
JOHN YDSTIE: This week's news that existing home sales fell by 27 percent caused many to grab their worry beads and start recalculating the odds of a return to recession. Sun Won Sohn, a former chief economist at Wells Fargo, says the mess in the housing market, along with stubbornly high unemployment, have caused him to raise the odds of a double dip to 40 percent in his economic forecast.
Professor SUN WON SOHN (Former Wells Fargo Chief Economist, California State University Channel Islands): So I think the government, both the Obama administration and Chairman Bernanke, need to take some additional action to make sure that we do not slide into another recession fairly soon.
YDSTIE: Sohn, who's now a professor at California State University Channel Islands, says one problem to address is the lack of credit available to small and medium-sized businesses.
Prof. SOHN: Even when the economy seemed to be doing better earlier this year, small to medium-sized companies were really suffering. So perhaps we can do something to help them out in terms of getting credit and then, you know, help them hire people.
YDSTIE: Princeton Professor Alan Blinder, a former vice chairman of the Federal Reserve, says one way for the Fed to help small businesses is to quit paying interest on the trillion dollars in reserves that banks have on deposit at the Fed.
Mr. SOHN: And, in fact, you don't have to stop at zero. You could actually charge banks for the storage privilege. The idea is to free up some of this money and get it out into the marketplace and hopefully some of it finds its way into new bank lending. That's what we really need.
YDSTIE: Blinder, who's traveling to the conference at Jackson Hole today, hopes Chairman Bernanke will signal the Fed is ready to do that in his speech tomorrow. Blinder also suggests that the Fed could tell bank regulators who are being tougher in the wake of the financial crisis, to ease up a bit on healthy banks and encourage them to make more loans. These moves might not have the power of an interest rate cut in normal times, but Blinder says the Fed is running out of options.
John Ydstie, NPR News, Washington.
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