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Reforming US financial regulation in 2010?

Business Times - 06 Jan 2010


Reforming US financial regulation in 2010? Chances are not so great

By LEON HADAR
WASHINGTON CORRESPONDENT

FEDERAL Reserve chairman Ben Bernanke insists that more effective federal regulation of the financial industry - and not using the central bank's tool of higher interest rates in order to burst potential asset bubbles - is the best defence against future financial crises.

Calling the recent financial crisis the 'worst in modern history', Mr Bernanke said over the weekend that tighter regulation, and not interest rate hikes, could have prevented the sharp downturn.

'Stronger regulation and supervision' of mortgage lenders 'would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates', said Mr Bernanke during an address before the American Economic Association's annual meeting in Atlanta.

Indeed, Mr Bernanke's speech seemed to be an attempt to defend…