There are ways to fight off the nation's next financial crisis, Federal Reserve Chairman Ben Bernanke said today, but before we worry about that governments must get financial systems working again to stabilize the economy.

Speaking at the Council on Foreign Relations, Bernanke said the U.S. government will continue to pour money into financial institutions if necessary.

"Until we stabilize the financial system, a sustainable economic recovery will remain out of reach," he said. "In particular, the continued viability of systemically important financial institutions is vital to this effort. In that regard, the Federal Reserve, other federal regulators, and the Treasury Department have stated that they will take any necessary and appropriate steps to ensure that our banking institutions have the capital and liquidity necessary to function well in even a severe economic downturn."

He went on to say that new regulations could "make crises less frequent and less virulent."

First among his four reform proposals was to deal with companies that are "too big to fail" before they fail. The government already has Citigroup and AIG on life support--costing hundreds of billions of dollars--and Bernanke, without mentioning any company by name, said the Fed's "commitment to avoiding such a failure remains firm."

"Looking to the future, however, it is imperative that policymakers address this issue by better supervising systemically critical firms to prevent excessive risk-taking and by strengthening the resilience of the financial system to minimize the consequences when a large firm must be unwound," Bernanke said.

The second step would be to strengthen the rules under which the financial markets operate, making sure the infrastructure remains strong in times of stress.

Third, Bernanke said, regulations need to be flexible so as not to "overly magnify the ups and downs in the financial system and the economy," such as allowing banks to lend more money in a bad economy than in a good economy.

Lastly, Bernanke proposed a government group that would monitor and address large-scale systemic problems.

Bernanke said his own agency may or may not be able to do the job but should certainly be involved.

"As a practical matter, however, effectively identifying and addressing systemic risks would seem to require the involvement of the Federal Reserve in some capacity, even if not in the lead role," he said.

The stock markets reacted well to Bernanke's comments, particularly about not letting big banks fail. Financial stocks rallied in the morning, climbing around 10 percent after weeks of declines.