Bernanke Urges Rules Overhaul to Stem Risk Build-Ups (Update4) - Bloomberg.com

March 10 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke urged a sweeping overhaul of U.S. financial regulations in an effort to smooth out the boom-and-bust cycles in financial markets.

“We should review regulatory policies and accounting rules to ensure that they do not induce excessive” swings in the financial system and economy, the central bank chief said today in remarks prepared for an address to the Council on Foreign Relations in Washington.

Bernanke recommended that lawmakers and supervisors rethink everything from the amounts firms set aside against potential trading losses and deposit-insurance fees to protections for money-market funds. His remarks reflect a judgment that the U.S., just like emerging-market nations in the past, failed to properly manage a flood of capital over the past decade and a half.

The markets seem to be rallying today on Bernanke’s speech, but what he is describing is creating a command market economy controlled from Washington.

As history shows, that way lies disaster.

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