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Bernanke looks at future protections
WASHINGTON (7/9/08)—The financial turmoil since last August underscores the need to find ways to make the financial system more resilient and stable, said Federal Reserve Board Chairman Ben Bernanke in a speech Tuesday. Bernanke noted that financial crises occur periodically, have done so for hundreds of years, and that it is “unrealistic to hope” they can be entirely limited. However, recent experience has served to underscore the serious economic costs of financial instability, he said, adding the Fed will continue to work toward improving its ability to “play its necessary role” of supporting economic growth and making credit available to all qualified borrowers. He said that in an effort to prevent a repeat of the current problems in the mortgage market, the Fed will issue new rules next week aimed at protecting future homebuyers from the questionable lending practices that have caused the upheaval. (see related story, “Fed vote on HOEPA slated for July 14”) Bernanke also indicated that the Fed may allow more time for Wall Street firms to make use of the Fed’s emergency loan program. In March, the Fed allowed investment houses temporary access to the Fed’s overnight loan system—a cash source previously available only to commercial banks. The temporary access is supposed to expire mid-September. Into the future, Bernanke said, the Fed will work collaboratively with regulators both here and abroad as well as with financial the firms themselves, to redouble efforts to strengthen the capital positions, liquidity reserves, and risk-management practices of the institutions that are supervised by the Fed. “Shareholders, managers, and investors are likewise taking steps to protect their interests in a period of continued market strains,” he said. Use the resource link below to read Bernanke’s full comments.
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