nevada, where home prices rose much more than the national average, prices have declined by roughly 40 percent. over the past year, house prices have declined by another 4 percent, though they remained roughly flat, when one excludes distress sales. william c dudley, 2011 : “ securing the recovery and building for the future. ” remarks at united states military academy at west point, new york, november 17. based on the corelogic index. bis central bankers ’ speeches home construction collapsed with new single family starts falling from a peak rate of 1. 75 million homes per year to a low of 360, 000 in early 2009. after a very slight pick - up, they have been bumping along at about a 425, 000 annual rate for over a year. although the number of mortgages becoming delinquent is off its peak, it remains very elevated and increased in the third quarter of 2011. 3 according to the mortgage bankers association of america, at the end of that quarter there were roughly 1. 5 million first lien mortgages 90 or more days past due, and 2 million first lien mortgages in some stage of foreclosure. over time, without an improvement in housing and the labor market, more loans will become seriously delinquent. moreover, absent more aggressive efforts to find economically efficient alternatives to foreclosure – loans already seriously delinquent and in foreclosure will become real estate owned by the lender, or reo. my staff estimate that the flow of properties into lender reo in 2012 and 2013 could be as high as 1. 8 million per year, up from around 1. 1 million in 2011 and around 600, 000 in 2010. the overhang of properties in the foreclosure / reo pipeline continues to exert downward pressure on house prices and housing activity. recent surveys by macromarkets and by fannie mae indicate that households expect negligible gains in home prices over the next few years, with many expecting that prices will continue to decline. macroeconomic consequences the ongoing weakness in housing has made it more difficult to achieve a vigorous economic recovery. housing has inhibited economic activity through a number of channels. first, the strong rebound in residential investment that typically powers economic recoveries following deep recessions has been absent. for example, nine quarters following the ends of the mid - 1970s and early 1980s recessions, residential investment had climbed by 65 percent and 55 percent, respectively, above the level at the

failing to pay for the negative externalities they created, some changes in the corporate decision - making are expected. the second point is that “ there is a strong link between financial stability, on the one hand, and capital and financial discipline, on the other. ” a competitive and stable economic framework has to ensure an appropriate balance between rights or liberties and obligations or accountability of entrepreneurs. while many efforts have already been made on the macroprudential side, we should also pay attention to the micro level. when a crisis hits, you have to have your house in order. that means you have to address preemptively your own vulnerabilities. at the heart of any economy lies the capital, which in developing countries is the main factor of production. the quantity and quality of capital ensure the competitiveness of the economy, which creates the conditions for reaching an optimal macroeconomic equilibrium. the segregation between freedom and responsibility at the level of firms seriously undermines the foundation of the market economy and creates deep social disparities. 3 / 4 besides a strong capital base, a fully functional market economy needs strong financial and payment discipline. without these, financial instability would likely appear. * * * and, i would like to conclude by expressing, on behalf of the national bank of romania, our appreciation to all the participants for attending the seminar and to the imf for their constant support in organizing such useful debates. as the purpose of the seminar is to discuss current financial stability challenges and to exchange knowledge in dealing with such challenges, i believe that the objective has been achieved during these two days event. finally, taking into account : first, the issues i have mentioned above ; second, the direct and strong correlation between the capital and the real economy and third, the fact that the distinguished participants who will take part in the next year seminar can offer the possibility to share experience among countries and institutions, i would like to suggest that the 2020 event topic to be “ the capital in the real economy as a cornerstone of the financial stability ”. 4 / 4