The key to restoring the financial system and economy to health is banks lending responsibly, Federal Reserve Board vice chairman Donald L. Kohn said yesterday.

“The challenge for regulators and other authorities is to create an environment that supports greater bank intermediation, which should help to restore the health of the financial system and the economy,” Kohn said, according to prepared text of remarks he made at the Office of Thrift Supervision’s national housing forum. “We want banks to be willing to deploy capital and liquidity, but they must do so in a responsible way that avoids past mistakes and does not create new ones.”

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