Fed Governor Randall Kroszner (voter), speaking at a conference of state bank supervisors, said that mortgage markets will recover slowly and that the key to the recovery is better risk management.
"Recovery in the mortgage markets will take time and will require more market and regulatory discipline," said Kroszner.
He called on banks to limit the current foreclosure crisis, with greater transparency and less complexity in credit instruments.
Krosnzer laid partial blame for the current crisis on investors who were attracted to these structured securities without a thorough understanding of the underlying risk profiles.
"As financial institutions strengthen risk-management practices and as supervisors ensure that the necessary actions are taken, I expect the financial system as a whole to become more resilient" said Kroszner.
Krozner offered no comment of state of the U.S. economy and monetary policy.
On May 7, Kroszner said rising mortgage foreclosures are an "urgent problem" and called on Congress to pass a Fannie Mae and Freddie Mac regulatory bill.
By Steve Stecyk and edited by Cristina Markham