Fed to Crack Down on Subprime Loans

The Federal Reserve will issue new rules next week restricting subprime lending and other exotic loans aimed at borrowers with weak credit, Ben Bernanke said today. He said the Fed is also considering extending the overnight low-cost loan program, which helps big banks in need of quick cash, a sign that the Fed believes the financial crisis will continue into 2009.

“Our efforts today are concentrated on helping the financial system return to more normal functioning,” Bernanke said. “It is not too soon, however, to begin to think about the steps we might take to reduce the incidence and severity of future crises.” He also reiterated that Fannie Mae and Freddie Mac, which took massive stock dives yesterday, are key to his mortgage recovery plan. (More Ben Bernanke stories.)