By Steven K. Beckner

(MNI) – Federal Reserve Chairman Ben Bernanke Thursday stressed the
need for the Fed to properly reform its duty to guard against “systemic
risk” in regulating the nation’s leading financial institutions, as the
economy and financial system struggle to recover from the mortgage
finance debacle of 2007-08.

Last year’s Dodd-Frank Wall Street Reform and Consumer Protection
Act required the Fed to take a “macroprudential” approach to financial
supervision. Or, as Bernanke put it, it must “consider the health of the
financial system as well as the health of individual firms and markets.”

And the Fed chief said it is vitally important that “we must get
this right.”

He was opening a conference on “Regulation of Systemic Risk,”
co-sponsored by the Federal Reserve Board and the Journal of Money,
Credit and Banking in Washington, D.C.

Speaking less than a week before Federal Reserve policymakers hold
a two-day Federal Open Market Committee meeting to assess the economic
outlook and consider new stimulus measures, Bernanke made no comments on
monetary policy.

Rather he focused his brief prepared remarks on the topic of the
conference.

“The recent financial crisis has spurred a great deal of research
on its causes and, more broadly, on the topic of systemic risk and its
regulation,” he said. “This research is of critical importance. It can
inform the design and implementation of macroprudential regulations and
policies, and I suspect no one in this audience needs to be convinced
that we must get this right.”

“The nine papers at this conference make a variety of welcome
contributions in this area,” Bernanke continued. “Two focus on an
important aspect of the recent financial crisis — namely, the rise and
fall of mortgage securitization and associated swings in real estate
lending.”

“Other papers study the causes and indicators of systemic risk more
generally and look at how well macroprudential regulations and policies
can address those causes,” he went on. “Finally, several papers examine
specific regulations from a macroprudential perspective, including
capital requirements and risk retention rules for securitization.”

“Bernanke said “the discussants’ remarks, the general discussions,
and the policy panel will surely be very helpful in identifying fruitful
directions for further research.”

Among the speakers at the conference this afternoon will be Fed
Governor Daniel Tarullo.

** Market News International **

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