Federal Reserve Chairman Ben Bernanke has been giving a speech this morning at the Council on Foreign Relations in Washington D.C. about financial reform and systematic risk. While Bernanke talked about additional steps being needed to avoid future crises, he also said that stable markets have to be in place for a recovery. He noted that government actions should be coordinated when needed and that governments must keep taking forceful steps.
It is no surprise that Bernanke is urging an overhaul of rules and regulations for the largest firms in order to avoid systematic failure. He also repeated his call for the Federal Reserve to have power over settlement systems.
This is no shock. The Fed already regulates many aspects of this. But it is easy to see where some might claim a grasp that is too wide. That may only be exacerbated by the call for more of a globally coordinated financial regulation.
Bernanke is saying that the system needs to avoid the failure of the largest financial firms. Moreover, he predicted that the recession could end later in 2009 if there is bank stability, and that 2010 will be the first year of growth. But as a joke, he did note that his predictions about the depth and timing of the recession has been as successful as the win-loss record of the Washington Nationals.
Bernanke has said that loss provisioning accounting needs to be reviewed, but he is also not supporting changes to mark-to-market accounting.
JON C. OGG
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