WASHINGTON, july 8: The Federal Reserve, trying to stabilise a shaky US financial system, may give squeezed Wall Street firms more time to tap the central bank’s emergency loan program, chairman Ben Bernanke said Tuesday.

And, in an effort to prevent a repeat of the current mortgage mess, Bernanke said the Fed next week will issue new rules aimed at protecting future homebuyers from dubious lending practices.

The rules will crack down on a range of shady lending practices that has burned many of the nation’s riskiest “subprime” borrowers — those with spotty credit or low incomes — who were hardest hit by the housing and credit debacles. The plan would apply to new loans made by thousands of lenders of all types, including banks and brokers.

It would restrict lenders from penalising risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower’s income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower’s ability to repay.

In an extraordinary action, the Fed in March agreed to let investment houses go to the Fed for a quick, overnight source of cash.

Damage control

•Wall Street firms to get more time to tap the central bank’s loan programme

•Fed to also issue new rules aimed at protecting buyers from dubious lending practices