Former Federal Reserve Chairman Paul Volcker said on Monday that the U.S. Federal Reserve is taking the appropriate measures to support the great pressures that the financial system is currently experiencing.

Speaking at a conference on financial market supervision in New York, Volcker said that the Federal Reserve has used its authority "well beyond what's normal". Volcker added that current Fed Chairman Ben Bernanke is doing a good job in handling the current crisis.

In a bid to reestablish credit markets and buoy the economy, the Federal Reserve announced on Monday that it is increasing the size of term facility auctions and that it will begin paying interest on required and excess bank reserves.

Volcker added that the Treasury's response to the crisis has been "appropriate given the risks".

By Steve Stecyk and edited by Nancy Girgis
©CEP News Ltd. 2008