The nation’s economic policy heads outlined sweeping recommendations to strengthen the nation’s credit markets, calling for stronger licensing standards for mortgage brokers, more due diligence from credit-rating agencies and stronger trading systems for complex instruments in an effort to avoid another credit meltdown.“Regulation needs to catch up with innovation and help restore investor confidence, but not go so far as to create new problems, make our markets less efficient or cut off credit to those who need it,” Treasury Secretary Henry Paulson said during a speech at the National Press Club. “We are encouraging financial institutions to continue to strengthen balance sheets by raising capital and revisiting dividend policies; we need those institutions to continue to lend and facilitate economic growth.”

Paulson, who heads the President’s Working Group on Financial Markets, said that the recommendations emanate from seven months’ work by the group, which is comprised of the heads of the Treasury, the Federal Reserve Board, the Securities and Exchange Commission, the New York Federal Reserve Board and the Commodity Futures Trading Commission.

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