Fed's Plosser-hasty policy fixes rarely good ones

WASHINGTON, March 30 (Reuters) - Philadelphia Federal Reserve Bank President Charles Plosser on Friday cautioned against seeking quick policy solutions to pressing problems like rising defaults in subprime mortgage markets.

Speaking at a Fed conference on community development, Plosser never referred directly to the issue of subprime lending defaults but left little doubt he was talking about calls for action to deal with the problems the sector faces.

"While the symptoms of economic and financial hardship can be stark and dramatic at times, the causes are often subtle and complex," Plosser said.

"Bold headlines, graphic news stories are tempting to generalize and may evoke calls for immediate policy response," he added. "But public policy driven by headlines rarely turns out to be good public policy."

Regulators have come under harsh scrutiny from lawmakers for failing to anticipate some of the problems that large-scale lending to borrowers with poorer credit histories are now facing.

Plosser also said community development efforts should not seek to override normal market forces, but rather to harness them to create more opportunity for people to build wealth.

"When it comes to devising economic development policy and programs, it's important to remember that our goal is to increase the opportunity for people to succeed in our market economy," Plosser said. "We must remember that markets are a powerful source of innovation. Our development efforts should not necessarily focus on thwarting or overriding market mechanisms, but rather they should focus on taking greater advantage of it."