Federal Reserve Board Governor Roger W. Ferguson Jr. said Thursday that lawmakers should quickly adopt financial reform legislation when they convene next year.

"Congress missed an historic opportunity to enact HR 10," Mr. Ferguson said at a luncheon sponsored by Women in Housing and Finance. "Hopefully Congress will ... quickly enact legislation upon its return."

Chances for quick passage are good, he insisted, because the final version of HR 10, as the reform bill was called, was supported by banking, securities, and insurance groups. Only disputes over the Community Reinvestment Act blocked final passage, he said. "Rather than being dead, HR 10 is really in hibernation."

Reform is necessary because the current legal framework encourages banks to exploit legal loopholes and forces regulators to interpret laws that were written for a different era, he said.

"The result ... is an unlevel playing field that helps the most aggressive," he said. "It also means that different players will gain different advantages depending upon the aggressiveness of their functional regulator in interpreting the law."

Only Congress can level the playing field between the banking, securities, and insurance industries, he said. "That is why you may not hear many people saying that HR 10 is the perfect bill," he said. "But maybe that is what makes it the perfect bill over all."

In wide-ranging remarks, Mr. Ferguson tried to dispel persistent rumors that the central bank cut the Fed funds target rate and the discount rate last week because it knew a major financial firm was on the verge of collapse.

"We based our decision on our analysis of the general tenor of financial markets and their likely effects on the economy, not a foreknowledge of a major financial disaster as some have speculated," he said.

Mr. Ferguson, as is Fed custom, declined to state whether more rate cuts are in the works. But, he said the Fed must be "as vigilant and forward looking as possible" to both encourage growth and to keep inflation in check.

"We must recognize that it takes some time for monetary policy to transmit into the real sector, and therefore it is probably better to be ahead of challenges, not reacting to events," he said.

Responding to questions, Mr. Ferguson said fears of a credit crunch are "overstated." Though banks have tightened standards, they are not cutting off credit to worthy borrowers, he said.

Also, Mr. Ferguson said hedge funds should not be subject to tighter regulation.

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