Ben Bernanke, chairman of the Federal Reserve, entered the shark-infested waters of Washington regulatory battles yesterday and cautiously suggested that the US central bank be given new powers to oversee financial markets.

Ben Bernanke, chairman of the Federal Reserve, entered the shark-infested waters of Washington regulatory battles yesterday and cautiously suggested that the US central bank be given new powers to oversee financial markets.

Bernanke told a conference in Washington that Congress would have to equip the Fed with new powers if it wanted to give the central bank the job to limit the impact of financial market turmoil on the economy.

The world's most powerful central banker made the remarks only a few days after Wall Street was declared to be a bear market, having fallen 20% from its peak in October.

Bernanke also said the Fed, which is trying to stabilise a shaky US financial system, may give squeezed Wall Street firms more time to tap the central bank's emergency loan programme.

"The Federal Reserve is strongly committed" to financial stability and is "considering several options, including extending the duration of our facilities for primary dealers beyond year-end," Bernanke said.

And, in an effort to prevent a repeat of the current mortgage mess, Bernanke said the Fed next week will issue rules aimed at protecting future homebuyers from dubious lending practices.

The rules will crack down on a range of shady lending practices that has burned many of the nation's riskiest sub-prime borrowers - those with spotty credit or low incomes - who were hardest hit by the housing and credit debacles.

The plan would apply to new loans made by thousands of lenders of all types, including banks and brokers.

It would restrict lenders from penalising risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and stop lenders from making loans without proof of a borrower's income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.