WASHINGTON, March 26: The collapse of investment giant Bear Stearns highlights the need to “think more broadly” about regulation of securities firms in the US, Treasury Secretary Henry Paulson said.

Paulson, speaking at the US Chamber of Commerce on the state of financial and housing markets, said his office is working on a “blueprint for regulatory reform” in an effort to avert further market turmoil.

“Our economy and our capital markets are flexible and resilient and I have great confidence in them,” Paulson said. “I am certain we will work through this situation and go on to new heights as we always do.”

But the top US economic official also said the meltdown of Bear Stearns, which was rescued from a cash squeeze in a buyout by JPMorgan Chase supported by the Federal Reserve, highlights the need for a more comprehensive regulatory review.

“This latest episode has highlighted that the world has changed as has the role of other non-bank financial institutions, and the interconnectedness among all financial institutions,” he said.

“These changes require us all to think more broadly about the regulatory and supervisory framework that is consistent with the promotion and maintenance of financial stability.”The move by the Fed to open its lending to securities firms on the same terms as regulated banks was appropriate, Paulson said, but only as an emergency measure.

“Access to the Federal Reserve’s liquidity facilities traditionally has been accompanied by strong prudential oversight of depository institutions, which also has included consolidated supervision where appropriate,” Paulson said.

“Despite the fundamental changes in our financial system, it would be premature to jump to the conclusion that all broker-dealers or other potentially important financial firms in our system today should have permanent access to the Fed’s liquidity facility. Recent market conditions are an exception from the norm.”

The Treasury has been working on a major reform plan for financial markets and had been expected to release it by the end of this month.—AFP