By AP Economics Writer
updated 4/4/2011 8:48:21 PM ET 2011-04-05T00:48:21

Regulators are working closely to strengthen oversight of inner workings of the nation's financial system, part of a broader effort to prevent a repeat of the 2008 financial crisis, Federal Reserve Chairman Ben Bernanke said Monday.

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The financial overhaul law enacted last year directs the Fed and other agencies to better coordinate supervision of financial "clearinghouses."

They are institutions that handle the enormous volume of payments and transactions of securities and derivatives conducted each day by financial companies. Clearinghouses are an important part of the country's financial infrastructure.

These institutions generally performed well during the financial crisis, Bernanke said in a speech to a financial markets conference meeting in the Atlanta suburb of Stone Mountain, Ga.

But he added: "We should not take for granted that we will be as lucky in the future."

Bernanke said the Fed is working with the Securities and Exchange Commission and the Commodity Futures Trading Commission to implement the new law's provisions.

Fielding questions after his speech, Bernanke stuck to a prediction that the sharply higher prices for oil, food and other commodities will be "transitory." Bernanke told Congress in early March that the rise in oil prices will cause only a brief and modest rise in consumer prices.

"That being said, we have to monitor inflation very closely because if my assumption is not correct, we have to respond to that,'" Bernanke said Monday night.

Most economists think the Fed will start boosting interest rates next year to fend off inflation. However, some analysts think the Fed will be forced to start raising rates near the end of this year.

Bernanke also raised concern that the high number of foreclosures will continue to weigh on home prices, household wealth and consumer confidence.

"It's one of the reasons the recovery is not as strong as we'd like it to be," he said.

In his speech, Bernanke did not talk about the Fed's $600 billion government bond-purchase program, which is scheduled to end in June.

The program, launched in early November, is intended to invigorate the economy by spurring Americans to spend more. The program aims to lower rates on loans and to boost stock prices.

A vocal minority on the Fed has raised concerns that the bond purchases, combined with higher prices for food, fuel and other commodities, will spread inflation through the economy. Some members have said they might push for either an early end to the program or to scale it back. The Fed's next meeting is scheduled for April 26-27.

Bernanke also didn't discuss the state of the U.S. economy in his speech. Last week, the government reported that the unemployment rate fell to a two-year low of 8.8 percent as companies stepped up hiring. Even with the improvement, the economy faces pitfalls. High gasoline prices and still-depressed home values could crimp consumers spending, a key ingredient to the economic recovery.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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