Ex-Fed chair: investment banks need stricter rules

SEC Chairman Christopher Cox has said the SEC may require big investment banks to maintain larger cash cushions in times of market disruption.

Volcker, meanwhile, endorsed giving the Fed greater authority but warned against an excess of power that might threaten the agency's political independence.

That independence "is integral to (its) central responsibility ... for the conduct of monetary policy," he said.

At the height of the credit crunch in early March, the Federal Reserve provided a $29 billion loan to support JPMorgan Chase & Co.'s purchase of Bear Stearns, which had been the fifth-largest investment bank until its near-collapse.

Bernanke also decided that month to extend emergency loans to investment banks, the broadest use of the central bank's lending authority since the 1930s.

"When things are going well, no one wants to be regulated," Volcker said. "When things are going bad, everyone says to the regulator, Where were you?"