current financial crisis has exposed among market participants and i talked to many of them i think there are two policy changes that are needed that are well recognized first strengthen our regulatory infrastructure and second adopt appropriate regulation oversight to mitigate the systemic systemwide risk crossed financial markets instruments markets in this decision in addition i believe that macroeconomic policy should lean against that credit which creates financial instability in my view the federal reserve is best equipped to take the lead on systemic risk regulation and oversight like others i think this function is an essential and natural extension the federal the feds and the traditional monetary policy role and of its responsibilities last resort the three reasons three factors of support that claim first the fed is the ultimate guardian of our financial markets and so it should be the agency that ensures the safety and soundness of the most important financial institutions operating in those markets second the process of intermediation through traditional lenders and the capital markets has become increasingly complex supervision of the institutions involved and the fed's ability to make the right monetary policy decisions and finally the fed's expertise in financial markets and this makes it a natural choice of the fed's leadership in the supervisory capitals program demonstrated that expertise short good monetary policy and financial stability in my view are complementary as to booms and busts of the stabilize the economy and financial system at great cost a financial stability mandate of the fed requires a focus on the house and credit as well as systemic regulation and oversight and a policy rules required for overlap substantially that may explain why the other countries that separate such responsibilities in the traditional role of the central bank know better than naming the fed to this role won't solve all of our problems that i just see why in the rest of my time outline some related remedies conclude by answering the four questions you raise in my view our regulatory system has three major shortcomings provide rather than financial activity which allows some firms to take on risky activities within that with an adequate oversight a focus on systemic risk is one remedy for that problem designating the this hearing in our financial services industry is created institutions that are too big to fail remedies needed should include more extensive oversight and supervision of large complex financial institutions and explicit regulatory institutions to help offset the moral hazard created by an implicit guarantee and a strong resolution framework that is understood by all before it an ad hoc approach creates uncertainty and system of capital regulation that should improve financial stability and help monetary leaning against the wind of acid must resolve the tension between accountants who want to limit reserves and regulators want to build them in favor of the regula are there conflicts with the fed's traditional role here yes there can be in a crisis decisions about particular firms likely would involve the fed in political considerations and the use of taxpayer funds that could compromise in would produce a better outcome the coordination would have to take place among the various regulators that we have power so that information doesn't slip through the cracks so there we don't miss the activities because markets are global and so we need to coordinate where the federal reserve and other regulators will need to coordinate across borders with their counterparts overseas taking into account what institutions