Fed's Bernanke - don't over-regulate hedge funds

WASHINGTON, Feb 14 (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday that U.S. authorities must take care not to stifle financial innovation by over-regulating the derivatives and hedge fund industries.

"I would be very reluctant to get involved in heavy-handed, direct regulation of hedge funds," Bernanke told the Senate Banking Committee in response to a question during semi-annual testimony on monetary policy.

"One of their key characteristics is that they are very nimble ... and that is good for the economy, because they help to create liquidity in markets, they help to spread risks around more broadly, and a regulatory regime that inhibited that flexibility and nimbleness would eliminate a lot of the economic benefits," he said.