Fed's Plosser: need higher capital requirements

PHILADELPHIA Wed Oct 20, 2010 12:47pm EDT

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PHILADELPHIA (Reuters) - Government oversight of the financial system should be designed to make market participants more cautious about risks, Philadelphia Federal Reserve Bank President Charles Plosser said on Wednesday.

"This requires scaling back some of the safety net subsidies that have risen over the years and increasing capital requirements," he said in remarks prepared for delivery to the Union League in Philadelphia.

"Implicit government guarantees to firms that are too big to fail and to housing finance agencies need to be reduced," he said.

Plosser did not discuss the outlook for the economy or monetary policy in a speech that focused on regulation.

The Philadelphia Fed chief questioned whether recently enacted financial regulatory reform laws will ensure the ability to wind down large firms without rattling the broader financial system. (Writing by Mark Felsenthal; Editing by Andrea Ricci)

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