Ben Bernanke, chairman of the Federal Reserve, has laid the blame for the credit crunch on the ratings agencies, the investors in sub-prime securities who believed them, and inappropriate incentive structures.

Delivering the findings of the President's Working Group on Financial Markets, Mr Bernanke said: “Investors often took insufficient care in evaluating the risks of structured credit products, in part because they over-relied on the evaluations provided by the credit ratings agencies.

“Investors must take more responsibility for developing independent views of the risks of sub-prime mortgage securities,” Mr Bernanke added.

He was speaking at a lunch in Richmond, Virginia, on behalf of the Working Group, which also includes Henry Paulson, the US Treasury Secretary, and Christopher Cox, chairman of the Securities and Exchange Commission.

Mr Bernanke also laid the blame on poor risk management practices among large financial institutions, and on incentives that rewarded bankers for the volume of mortgage-backed securities they had packaged, rather than the quality of the underlying assets.

His recommendations included the introduction of nationwide licensing standards for more brokers and more consistent government oversight of mortgage lenders. The credit agencies, he said, should provide greater transparency.

Chris Whalen, of Institutional Risk Analytics, a US consultancy, said: “Bernanke's comments are fair but it's a bit rich telling investors they should have known when the Federal Reserve - which could have done a lot more to prevent the meltdown - has not admitted that it dropped the ball.”

Many believe that the Fed could have reduced the severity of the credit crunch had it acted earlier.

The US central bank has reduced the base interest rate by 3 percentage points since last August in an attempt to spur the economy and lower the cost of mortgages.

In recent weeks it has dropped the interest rate on its discount window of cheap loans from 3.5 per cent to 2.5 per cent.

The Fed has also extended its availability from the commercial banks it has traditionally served to include securities firms, as it seeks to boost liquidity.

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