http://www.bloomberg.com/…

Federal Reserve Chairman Ben S. Bernanke, seeking to allay renewed concerns over the health of the nation’s financial system, said the central bank may extend its emergency-loan program for investment banks into next year.

“The Federal Reserve is strongly committed” to financial stability and is “considering several options, including extending the duration of our facilities for primary dealers beyond year-end,” Bernanke said in a speech to a conference in Arlington, Virginia.

Woot! More inflation!

Bernanke also endorsed proposals to set up a federal liquidation process for a failing investment bank. The Treasury should “take a leading role in any such process” in consultation with regulators, he said. Such a resolution mechanism may help reduce concern that investors and dealers begin counting on Fed aid in case their bets go wrong.

So like enforcing the current bankruptcy laws? I somehow doubt it.

Fed officials are working with the Securities and Exchange Commission and securities dealers “to increase the firms’ capital and liquidity buffers,” Bernanke said.

More inflation!!

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told the same conference that he supported Fed and Treasury proposals for “policies, because of what happened, to take proper action if a large investment bank goes bankrupt.”

Of course he does. He, and the rest of Wall St., directly benefit from this intervention and inflation.

Without any liquidation procedure in place, the Fed in March decided to make a bridge loan to keep Bear Stearns out of bankruptcy. The central bank then agreed to take on $30 billion of hard-to-trade Bear Stearns assets to help secure its takeover by JPMorgan.

“The Federal Reserve in essence bought $30 billion of mortgage product from Bear Stearns; I want to remind people we bought $350 billion,” Dimon said today. “We don’t really think” the deal will end up costing taxpayers money, he also said.

I do. Anyone with a cursory understanding of economics could see that taxpayers will be both directly and indirectly paying for this. The indirect in terms of all the likely new regulations and powers the Fed will get on top of the inflation that will continue to destroy the middle class and poor are likely the greatest costs.

Congress should legislate “consolidated supervision” of investment banks and other big securities firms, with the unspecified regulator having authority over capital, liquidity holdings and risk management, Bernanke also said today.

The Fed should also get “explicit oversight authority” over payment and settlement systems, putting the it on a par with counterparts from around the world, Bernanke said.

U.S. central bankers will already play a part in setting capital cushions at securities firms under an agreement yesterday with the SEC. The two agencies will collaborate in determining “guidelines or rules concerning the capital, liquidity and funding” arrangements of investment banks, the accord said.

Because obviously planned economies have worked so damn well. They function like clockwork everywhere they have greater control. Right Ben?

http://www.ft.com/…

Banks and investment banks whose health is crucial to the global financial system should operate under a unified regulatory framework with “appropriate requirements for capital and liquidity”, according to Timothy Geithner, president of the Federal Reserve Bank of New York.Writing in Monday’s Financial Times, Mr Geithner, a key US policymaker throughout the credit crisis and one of the main architects of the rescue of Bear Stearns, says that the US Federal Reserve should play a “central role” in the new regulatory framework, working closely with supervisors in the US and round the world.

In his speech, Mr Geithner will also say the Fed is examining whether to make “permanent” some of the new liquidity facilities put in place during the credit crisis, and called for central banks to establish a “standing network of currency swaps, collateral policies and account arrangements” to bolster liquidity during a future crisis.

So when they screwup, which is all the time, they directly instead of indirectly effect everyone on the planet. Wonderful…