Bernanke, 60, has set out a two-stage process for identifying potentially dangerous buildups in speculation. First, officials try to pinpoint asset markets where prices are grossly misaligned. Then they consider whether a sudden drop in those prices would be amplified throughout the financial system, as happened during the housing bust. Such intensification could occur if the investors holding those assets were highly leveraged, illiquid or interconnected with others.

The Fed’s “first, second and third lines of defense” for dealing with such imbalances is to rely on supervision, regulation and so-called macro-prudential policies, such as mortgage loan-to-value restrictions, Bernanke told the Brookings Institution in Washington on Jan. 16. Only as a last resort would it consider raising interest rates.

Stress Tests

The central bank already is using its annual stress tests of the nation’s biggest banks to build up the resilience of the financial system and discourage excessive risk-taking.

Stress testing “can potentially revolutionize bank supervision,” said former Bank of England Deputy Governor Paul Tucker, “though it will take some while to play out.”

One downside, according to Kashyap: the tests only cover banks, not other institutions such as money-market mutual funds where many of the risks may end up residing.

Bernanke himself has acknowledged other difficulties with the Fed’s approach: some of the tools still are being developed and may not be easy to implement quickly.

Turf Battles

That’s because they aren’t entirely under the purview of the Fed -- the Securities and Exchange Commission oversees money-market funds, for instance. Even inside the central bank, there are governance issues: The Fed’s board in Washington deals with capital standards while the Federal Open Market Committee, which includes regional Fed bank presidents as well as board members, is responsible for monetary policy.

The Financial Stability Oversight Committee, headed by Treasury Secretary Jacob J. Lew, was created in 2010 to deal with jurisdictional issues. “Turf battles” probably still will delay action, said Cecchetti, a professor at Brandeis International Business School in Waltham, Massachusetts.