By Vicki Needham - 05/06/10 03:42 PM EDT
Meanwhile, the new framework should include enhanced consolidated supervision of bank holding companies and similar oversight for systemically important nonbank financial firms.
Bernanke also advocated for a "strong resolution framework that allows policymakers to wind down failing firms and others important to the financial system without a "destabilizing bankruptcy and without a taxpayer bailout."
On Wednesday, the Senate easily approved an amendment offered by Senate Banking Chairman Chris Dodd (D-Conn.) and top Banking Republican Richard Shelby (Ala.) that essentially ends 'too big to fail' and eliminates loopholes used by regulators.
The Fed is moving ahead with issuing proposed guidance to help ensure that compensation structures at banking organizations do not encourage excessive risk-taking, he said. In addition, the central bank is leading cooperative efforts by market participants and regulators to strengthen the infrastructure of key markets, including securities repurchase agreements and credit derivatives and other over-the-counter derivative instruments, Bernanke said.
Senators are trying to work out OTC derivatives language for the financial reform measure. Senate Agriculture Chairwoman Blanche Lincoln (D-Ark.) has a proposal to regulate the markets and leading Republican Sen. Saxby Chambliss (R-Ga.) has offered an alternative for consideration.