"It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions," Bernanke said. "But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy."

President Bush, meanwhile, said the economy was strong enough to deal with turbulence on Wall Street.

Bush, speaking in the Rose Garden, said he was briefed on the financial markets by Treasury Secretary Henry Paulson.

"The markets are in a period of transition as participants reassess and reprice risk," the president said in a rare comment about Wall Street. "This process has been unfolding for some time and it's going to take more time to fully play out. As it does, America's overall economy will remain strong enough to weather any turbulence."

Many believe the odds are growing that the Fed will cut its most important interest rate, now at 5.25 percent, by at least one-quarter percentage point on or before Sept. 18, its next regularly scheduled meeting. The Fed hasn't lowered this rate in four years.

The Fed "will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets," Bernanke told an economics conference here.

On Wall Street, stocks rose after the Fed chief's remarks. The Dow Jones industrials were up around 90 points in late-morning trading.

To guide the Fed in terms of what its next move will be, Bernanke said policymakers will pay especially close attention to the "timeliest indicators" as well as information gleaned from businesses and banks around the country. Economic data that was taken before the credit markets really seized up in August will be much less useful to policymakers to assess the country's economic health, he explained.

It was his first speech — and his most extensive comments — since the credit crunch took a turn for the worst in August. The carnage in credit markets and the turmoil on Wall Street pose the biggest test of Bernanke's skills since taking the Fed helm 19 months ago.

President Bush was announcing steps Friday to aide homeowners who are having trouble making the payments on risky mortgages.

The Fed's most important interest rate, called the federal funds rate, has been at 5.25 percent for more than a year. Any reduction to this rate would mean lower interest rates for millions of people and businesses. That's why it is the Fed's main tool for influencing economic activity.

After listening to Bernanke's speech, John Makin, principal at Caxton Associates Inc., believed the Fed was moving "a tiny bit closer" to a rate cut.

In his remarks to a high-profile conference here on housing sponsored by the Federal Reserve Bank of Kansas City, Bernanke discussed some of the steps the Fed has taken so far to deal with the credit crunch.

While problems were triggered largely by heightened concerns about higher-risk "subprime" mortgages made to people with blemished credit histories or low incomes, Bernanke said "global financial losses have far exceeded even the most pessimistic projections of credit losses on those loans."

To stabilize wobbly markets, the Fed on Aug. 17 sliced its lending rate to banks by a half percentage point to 5.75 percent. It also has pumped billions of dollars into the financial system to help banks and other institutions get through the credit hump and carry out their business.

The Fed's main concern, however, is the extent to which these problems might short-circuit economic growth.

"The further tightening of credit conditions, if sustained, would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected, with possible adverse effect on consumer spending and the economy more generally," Bernanke said.

The fear is that if credit continues to become harder for people and businesses to get, spending and investment will be crimped. That could hurt overall economic growth. In a worst-case scenario, the country could slide into a recession. Credit is the economy's life blood. It allows people to finance big-ticket purchases such as homes and cars and can help businesses bankroll expansions and other things that can boost hiring.

After a five-year boom, the housing market went bust last year; problems are expected to persist well into next year as builders try to whittle down a glut of unsold homes.

During the housing slump, a combination of higher interest rates and weaker home values clobbered homeowners, especially those with blemished credit histories or low incomes holding higher-risk "subprime" loans.

With squeezed homeowners finding it impossible to make their mortgage payments or pay them in a timely fashion, foreclosures and delinquencies are soaring and are expected to get worse. Lenders have been forced out of business, and hedge funds and other big investors in subprime mortgage securities also have taken a big financial hit.

Very low initial "teaser" rates jumping to much higher rates as they reset are socking some homeowners. Analysts estimate 2 million adjustable-rate mortgages will reset this year and next. Steep prepayment penalties have made it difficult for some to get out of their mortgages. Some overstretched homeowners can't afford to refinance or even sell their homes.

Most of the carnage has been in the subprime market, but problems have spread to other more creditworthy borrowers. That has sent investors into periods of panic in recent weeks, causing stocks on Wall Street to careen wildly.

Separately, Michael Hoffman, 44 years old, who founded Ilytat, agreed to pay a $100,000 civil penalty and accepted an 18-month ban on working for an investment adviser. Both men settled without admitting or denying wrongdoing.

The SEC had accused Federighi of fraud in connection with "late trading" the practice of buying mutual fund shares after the 4 p.m. close of trading while receiving that day's closing price. The SEC found that Hoffman aided and abetted Bear Stearns & Co., which had allegedly processed the improper trades over a two-year period starting in 2000. Bear Stearns more than a year ago agreed to pay $250 million to settle related SEC charges, including a $90 million civil penalty that was the biggest imposed on a brokerage firm under SEC Chairman Christopher Cox.

"Mr. Federighi is delighted to have this matter resolved," his lawyer, William Goodman, said. "He is looking forward to re-entering the industry once the terms of the injunction have been complied with."

Hoffman closed Ilytat in 2002. Shortly after, Federighi started Gage. Gage operated until September 2003, when allegations of widespread mutual-fund trading abuses surfaced.

A lawyer for Federighi declined to comment. Tarek Helou, a lawyer for Hoffman, said that "Mr. Hoffman put an end to these trading practices at his firm more than five years ago. He did so long before it became a public issue, and he cooperated fully with the SEC. He is pleased that this is now behind him and is focused on moving forward."

In an SEC filing, Take-Two said the SEC staff informed the company that it plans to seek authority from the Commission to file charges and pursue a civil monetary penalty.

The Wells notice gives Take-Two a final chance to respond to the SEC and convince the agency not to file charges.

In the filing, Take-Two said it expects "to resolve this investigation by means of a settlement rather than a contested litigation of charges ... the 'Wells' call represents a significant step forward towards that resolution."

Take-Two said in April it had received a formal order of investigation from the SEC.

The New York-based company had said a review uncovered a significant number of option grants that were backdated during a period of more than six years to August 2003.

In February, former Take-Two Chief Executive Ryan Brant pleaded guilty to criminal charges over backdating options, becoming the first ex-CEO to do so in recent probes into options irregularities at dozens of U.S. companies.

Board of Trade members have long held special options-exchange rights, but the options exchange says the CME-CBOT merger wiped out those special rights.

The judge said Friday that Board of Trade members have a good case that the options exchange's new rule barring them from the trading floor does unfair damage to their economic interests. But he refused to issue the restraining order, saying money will be an adequate remedy if the rule is ultimately struck down after trial.

The Delaware judge also stayed action in a lawsuit filed by the Board of Trade against the options exchange last year, in which Board of Trade members claimed they are being cut out of a fair share of the option exchange's demutualization.

Board of Trade members argue that the contribution they made in creating the CBOE in 1973 entitles them to a share of the equity being distributed in the options exchange's demutualization. The options exchange has asked the Securities and Exchange Commission to endorse its view that Board of Trade members aren't entitled to anything in that process.

Judge Noble said he wants to see what the SEC says about the dispute before court action moves forward.

South Korea-based Gravity Co. Ltd., an online game developer, said Monday it and other defendants came to a preliminary agreement to settle a class-action lawsuit for $10 million.

The lawsuit pertains to purchases of Gravity's American Depositary Shares between Feb. 7, 2005, and Nov. 10, 2005, and was filed on behalf of Gravity securities buyers.

Under the proposed settlement, a $10 million fund will be set up to settle buyers' claims, of which Gravity will pay $5 million. The company said settlement administration and plaintiffs' lawyers' fees and various expenses will be paid from the fund before class-action suit members are paid.

Gravity said in a statement that it "has denied and continues to deny any and all wrongdoing in connection with this matter, but believes that given the uncertainties and costs associated with litigation, the settlement is in the best interests of the company and its shareholders."

Rogers argues the agency waited too long after Enron's 2001 collapse to sue him. Mintz says lawyers told him Fastow's dealings were properly disclosed.

Fifteen ex-Enron executives pleaded guilty to crimes in the conspiracy that destroyed Enron, once the world's largest energy trader. Neither Rogers nor Mintz has been criminally charged.