As shaky housing data continues to roll in, the Federal Reserve will issue new lending rules next week to restrict the issuance of complex mortgages and high-cost loans for people with weak credit, said Federal Reserve Board Chairman Ben S. Bernanke.
Speaking before the Federal Deposit Insurance Corp.'s Forum on Mortgage Lending for Low and Moderate Income Households in Arlington, Va., Mr. Bernanke also suggested that the Fed may extend its lending program for investment banks into the next year.
“The Federal Reserve is strongly committed to supporting the stability and improved functioning of the financial system,” he said, noting that the Fed is “currently monitoring developments in the financial markets” and is “considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue to prevail.”
Mr. Bernanke suggested that the central bank should increase its responsibility and be given broader power to regulate the financial markets.
He also said that Congress should consider requiring consolidated supervision of large investment banks and securities dealers and provide the Fed with the authority to set standards for capital, liquidity holdings, and risk management.
In related news, the Chicago-based National Association of Realtors' Pending Home Sales Index fell 4.7% in May.
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