Bernanke Wants More Control of Investment Banks

In a speech delivered this morning, Federal Reserve Chairman Ben Bernanke stated that the Fed may extend the direct lending facility to investment banks into 2009 as long as emergency conditions "continue to prevail".  Continued access to the window, however, will have significant consequences for investment banks.  Bernanke once again defended the Fed's bailout loan to Bear Stearns in the face of the investment bank's imminent bankruptcy, and outlined a few strategies for avoiding future investment banking bailouts.  These strategies included the Fed having control over investment banks' capital, liquidity holdings and risk management.  Furthermore, in case the Fed proves not to be a much better risk manager than the financial firms, the Fed will put procedures in place to enact orderly liquidations of investment banks in the event that they fail.  Will the banking sector be a safer place with Bernanke running the show?  I would bet a few dollars on that, but only because my dollars are fairly worthless these days...