PHOENIX (Reuters) - The United States needs a safer way to shut down large nonbank financial firms without destabilizing the entire financial system, Federal Reserve Chairman Ben Bernanke said on Friday.
"We have such a regime for insured depository institutions, but it is clear we need something similar for systemically important nonbank financial entities," he said in prepared remarks to a community bankers convention in Phoenix.
"Improved resolution procedures for these firms would help reduce the too-big-to-fail problem by giving the government the option of safely winding down a systemically important firm rather than keeping it operating," he said.
Bernanke said the central bank has "generally been encouraged" by the market response to its myriad of lending programs.
If a newly launched program called the Term Asset-Backed Securities Loan Facility -- or TALF -- works as planned, it should ease credit constraints on consumer, business and mortgage loans, he said.
Reporting by Tim Gaynor in Phoenix; Writing by Emily Kaiser in Washington; Editing by Neil Stempleman