The US central bank chief says that the Federal Reserve would issue new lending rules next week to restrict exotic mortgages and high-cost loans for people with weak credit, The Herald Tribune reports.
The chairman, Ben Bernanke, also says that the Fed is considering extending its program of low-cost overnight loans to the largest US investment banks into next year. The lending program, which is supposed to be temporary, began in March in response to liquidity problems on Wall Street during the near-collapse of Bear Stearns, which was sold to JPMorgan Chase to avert going into bankruptcy.
At a forum in Arlington, Virginia, on lending for low- and moderate-income households, Bernanke said Bear Stearns’s difficulties had highlighted weaknesses in the financial system that policy makers were trying to address. He says they included poorly underwritten mortgages, regulatory gaps, tight credit and insufficiently capitalized financial institutions.
The full article is available at The International Herald Tribune web-site.