Bernanke: Financial Stability Should Be Goal

Federal Reserve Chairman Ben Bernanke said Tuesday that regulators should look beyond repairing only the mortgage market and consider ways to make the overall U.S. financial system itself more stable.

Speaking at a Federal Deposit Insurance Corporation conference in Virginia, Bernanke said instability in the system since last year "has importantly affected the availability and terms of credit and the pace of economic growth." (Click here to read the entire speech.)

To address the situation, regulators shouldn't focus exclusively on mortgages, but instead would be wise to examine the wider financial marketplace "without compromising the dynamism and innovation that has been its hallmark."

Bernanke noted that some steps have already been taken, including by the President's Working Group in the U.S. and at the international Financial Stability Forum, which have produced reports on the credit crisis and provided recommendations for regulators and the private sector.

Many of the suggestions are being implemented, he said, including closer regulation of mortgage lending, strengthening of regulatory capital, liquidity-management requirements for banks and reforms of the credit-rating agencies.

"The recent experience, including the broader turmoil we have seen in the financial markets, will have -- indeed, is already having -- important consequences for U.S. regulatory policy," Bernanke said.

Next week, the Federal Reserve Board plans to issue new rules on mortgage lending, which will apply to all lenders and are meant to address some of the problems that have surfaced in recent years in mortgage loans, especially those with high interest rates.