Second, effective systemic risk oversight will require a broad range of expertise. This requires the right people, with experience operating in all the important areas of the financial system. In this regard, I believe that the Federal Reserve has an essential role to play. The Federal Reserve has experience and expertise in all three areas – it now oversees most of the largest U.S. financial institutions; it operates a major payments system and oversees several others; and it operates in the capital markets every day in managing its own portfolio and as an agent conducting Treasury securities auctions. Also, as the central bank, it backstops the financial system in its lender-of-last-resort role. Compared with where we were in late 2008 and early 2009, financial markets have stabilized, and the prospect of a collapse of the financial system and a second Great Depression now seems extremely remote. Even with this progress, however, credit remains tight, especially for small businesses and households. Economic growth has resumed, but unemployment has climbed to punishing levels. So while circumstances have improved, they are still very far from where we want them to be. We have no cause for celebration when the challenges facing so many businesses and households remain so daunting. Aggressive and extraordinary official interventions were imperative to bring about this nascent stabilization of our financial markets and economic recovery. The Federal Reserve has been at the center of many of these interventions.

14 I doubt, however, that bankers and investors would share this particular view of the philosopher, especially in the light of developments over the past few years. Let me conclude, however, on a reassuring note and a wish concerning the exit from the current crisis on the basis of the logic of Heraclitus that led him to the conclusion that “out of discord comes the fairest harmony” (έκ τῶν διαφερόντων καλλίστην άρμονίαν) – which, in the context of the discussions in this conference and in relation to our policy aims, would be translated into achieving sustainable growth in an environment of price stability and financial stability. Thank you very much for your attention. 14  8  See Kahn (1979). BIS Review 65/2009  References European Commission (2009), Spring Economic Forecast, May. Heider, F., M. Hoerova and C. Holthausen (2008), “Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk,” available at http://ssrn.com/abstract=1362113. International Monetary Fund (2009) “Global Financial Stability Report”, April. Kahn, C. (1979) “The Art and Thought of Heraclitus: Fragments with Translation and Commentary”, London: Cambridge University Press. Papademos, L (2009a). “The dual crisis: economic impact, policy response and exit strategy”, speech at the High-Level Panel Debate on “Europe in the Economic and Financial Crisis: How to bring back prosperity for everyone?”, Brussels, 4 May. Papademos, L (2009b). “Monetary policy and the ‘Great Crisis’: Lessons and challenges”, speech at the 37th Economics Conference “Beyond the Crisis: Economic Policy in a New Macroeconomic Environment” organised by the Österreichische Nationalbank, Vienna, 14 May 2009.