Fed: Examining Risk Key to Stemming Next Crisis

A new paper from Federal Reserve says an early warning system to detect financial problems before they reach crisis proportions must allow policymakers to better pinpoint areas of excessive risk-taking.

The staff paper says more up-to-date statistics - both at the level of individual companies and products as well as the big-picture, industrywide information - are needed.

The paper says Policymakers' analysis of the information should focus on recurring themes associated with financial instability such as excessive risk-taking by investors.

Fed Governor Donald Kohn and two staffers wrote the paper to be presented at a conference this week in Frankfurt, Germany.