National

Jan 3, 2010 12:16 PM by Associated Press

Fed boss: regulation first defense against bubbles

Federal Reserve Chairman Ben Bernanke says stronger regulation should be the first line of defense to prevent speculative bubbles that could send the economy into a new crisis.

But he's not ruling out higher interest rates to stop dangerous bubbles - such as the recent one in housing - from forming.

The Fed chief's remarks were his most extensive on the subject since the housing market's tumble led to the gravest financial crisis since World War II - and perhaps the worst in modern history, in his view.

Critics blame the Fed for feeding that housing bubble by holding interest rates too low for too long after the 2001 recession.

But Bernanke, in prepared remarks to the American Economic Association's annual meeting in Atlanta, defends the central bank's actions.

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