Bernanke: Strong Case for FED’s Explicit Authority Over Systemically Important Payment/Settlement Systems
FED chairman Ben Bernanke is speaking at an FDIC mortgage lending forum this morning. He says:
* New mortgage lending rules will be floated next week
* Short-term funding markets remain strained but continue to show improvement from March
* The FED is closely monitoring developments in financial markets and considering several options, including extending primary dealer lending beyond the end of this year “should the current unusual and exigent circumstances continue to prevail.”
* The FED’s decision to lend to primary dealers could “tend to make market discipline less effective in the future.” At the same time, reforms in the oversight of these firms must take into account the distinctive features of i-banking and avoid inhibiting efficiency and innovation.
* Dealers must demonstrate capability to manage failure of a major counterparty
* Welcomes efforts to improve regulation of Fannie and Freddie — they should be “strong, well-regulated, well-capitalized, and focused on their mission”