WASHINGTON – Federal Reserve Chairman Ben Bernanke told a panel investigating the financial crisis that regulators must be ready to shutter the largest institutions if they threaten to bring down the financial system.
"If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved," Bernanke said Thursday while testifying before the Financial Crisis Inquiry Commission.
Bernanke also said it was impossible for the Fed to rescue Lehman Brothers from bankruptcy in 2008 because the Wall Street firm lacked sufficient collateral to secure a loan. Lehman's former chief executive told the panel a day earlier that the firm could have been saved, but regulators refused to provide help.
The Fed chief presented his analysis of the crisis and views on potential systemwide risks as the panel approaches the end of its yearlong investigation into the Wall Street meltdown.
The financial overhaul law enacted this summer gives regulators the authority to shut down firms when their collapse poses a broader threat to the system. The process resembles the one used by the Federal Deposit Insurance Corp. to close failing banks.