WASHINGTON (MNI) – The following is a transcription of responses of
Federal Reserve Chairman Ben Bernanke Wednesday to questions during a
press conference following the FOMC meeting:

QUESTION:

Could you comment on the failure of MF Global which is a primary
dealer and specifically the Financial Times is reporting that the
leverage ratio at MF global was 40 to 1. Were you aware of that? Did you
— did the Fed approve of that? Is that an acceptable leverage ratio,
particularly since the financial crisis?

BERNANKE:

Certainly. The New York Federal Reserve Bank approved MF global to
be a primary dealer I believe it was in February of this year. At that
time the company met the criteria that have been set forth in terms of
management financial condition capacity and so on to qualify to be a
primary dealer. We have set those standards in a way that would allow
smaller firms like MF global to participate in a primary dealer market,
but I would like to emphasize just a couple of points. First we are not
the regulators of MF global. That’s done by the SEC and the CFTC. We do
not have ongoing insight in to developments within the company. And
secondly again the — making them a primary dealer did not in any way
constitute a seal of approval. In fact, the New York Fed’s website
contains a statement pretty much to that affect. So they were a primary
dealer. We stopped trading with them before they failed. And we have
suffered no losses or other consequences from our transactions with the
company. Again in terms of your question about leverage and financial
condition, the company declined very, very quickly based on a small
number of large bets. As far as I know we were not aware of that, but as
far as I know, but again I would like to emphasize we are not the
overseer’s the regulators of that company.

QUESTION:

To follow up on that question should the Fed be on an ongoing basis
monitoring its primary dealers?

BERNANKE:

The question is, was that an isolated case. I believe it was an
idiosyncratic case. We are monitoring the possible impacts on funding
markets and elsewhere and so far we have not seen signifiant impact on
financial stability.

QUESTION:

Should the Fed be monitoring it’s primary dealers.

BERNANKE:

Only if the Fed is the supervisor. In this case the combination of
a broker dealer and futures commission merchant imply that the SEC and
the CFTC are the supervisors this company would not have qualified as a
SIFI under the provisional guidance issued by the FSOC. So there is no
basis at this point for the Fed to be the overseer of that — of those
companies.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]