Fed's Fischer worried about limiting Fed's ability to lend in crisis

SAN FRANCISCO (Reuters) - A top Federal Reserve official on Sunday worried publicly that new restrictions on the Fed's ability to lend freely if a new financial crisis hits could do more harm than good.

"We have to worry a great deal about the fact that we’ve decided that the right way to go is to reduce moral hazard and to make it more and more difficult to intervene in the crisis," Federal Reserve Vice Chair Stanley Fischer said at a meeting of the American Economic Association. The Bank of England recently went the other way, he said, with rules that allow it to lend to any institution if needed in a crisis.

The Fed last month adopted a rule that stops it from bailing out individual companies, a change demanded by Congress after the central bank's controversial decision to help rescue American International Group (>> American International Group Inc) and others during the financial crisis.

(Reporting by Ann Saphir; Editing by Andrea Ricci)