U.S. Treasury's Ryan: Markets to emerge stronger

By David Lawder
WASHINGTON (Reuters) - The U.S. Treasury is confident that capital markets will recover from their current turbulence and emerge stronger with enhancements such as improved credit ratings, better disclosure and increased risk management, a senior Treasury official said on Wednesday.
Anthony Ryan, Treasury assistant secretary for financial markets, said markets were experiencing "a great deal of deleveraging" that has hurt liquidity and their ability to facilitate economic activities.

"I have confidence in the resilience of our markets, and that collectively we will work through this period of stress and make our markets even stronger," Ryan said in prepared remarks to the Exchequer Club in Washington.

Ryan said the weakness that triggered market turmoil was a breakdown in underwriting standards for mortgage origination, particularly for subprime mortgages originated from late 2004 through 2006.

Ryan said Treasury was working to deal with such breakdowns, mitigate systemic risks, restore investor confidence and facilitate economic growth.

His remarks did not directly address Treasury's role in arranging a weekend buyout for Wall Street investment bank Bear Stearns (BSC.N) amid a liquidity crisis that threatened a broader collapse on Wall Street.

Ryan's speech also promoted initiatives announced by the Treasury-led President's Working Group on financial markets to enhance stability by changing practices and some rules for participants to improve risk awareness, and enhance capital positions, credit ratings, disclosures and mortgage underwriting standards. Among these is implementation of strong national standards for state licensing of mortgage brokers and national standards for consumer protection on mortgages.

"Looking ahead, we expect practices to be different," Ryan said. "Financial products will be less complex and more transparent, and the mechanisms for dealing with complexity will improve. This will include better credit rating practices, improved capital cushions, better liquidity management, and enhanced disclosure and due diligence."

(Editing by Leslie Adler)