computerized financial communication. as automation has evolved, payment, clearing, and settlement systems have been developed for conducting and processing transactions within and between firms. however, many of these systems have historically operated in silos, which can be hard to streamline or replace. in some areas, business processes may still rely heavily on manual or semi - automated procedures. over time, banks and other firms have organized various types of clearinghouses to coordinate clearing and settlement activities in order to reduce costs and risks. the adoption of multilateral clearing in the united states was a key organizational innovation that began with the founding of the new york clearing house in the 1850s. this led to notable efficiencies and risk reduction in the clearing of checks. multilateral clearing was also used early on to improve clearing in the securities and derivatives markets. by the 1970s, the bis central bankers ’ speeches united states turned to technologies based on the centralized custody and clearing of bookentry securities in order to respond to the paperwork crisis in the equities markets. following the recent financial crisis, the united states - - along with many other countries - - expanded the scope of central clearing to help address problems in the bilateral clearing of derivatives contracts. today, the possible development and application of distributed ledger technology has raised questions about potentially far reaching changes to multilateral clearinghouses and the roles of financial institutions as intermediaries in trading, clearing, and settlement for their clients. in the extreme, distributed ledger technologies are seen as enabling a much larger universe of financial actors to transact directly with other financial actors and to exchange assets versus funds ( that is, to " clear " and settle the underlying transactions ) virtually instantaneously without the help of intermediaries both within and across borders. this dramatic reduction in frictions would be facilitated by distributed ledgers shared across various networks of financial actors that would keep a complete and accurate record of all transactions, and meet appropriate goals for transparency, privacy, and security. at this stage, such a sea - change may sound like a remote possibility, particularly for the high volume and highly regulated clearing and settlement functions of the wholesale financial markets. but profound disruptions are not unprecedented in this arena. in the early 1960s, the use of computerized book - entry securities systems to streamline custody, clearing, and settlement in the securities markets may have seemed like a technologist's pipe dream. but these technologies became an important part of industry - wide changes in the 1970s. today we rely on these

one of the few business - led recessions in the united states since the end of the second world war. most recessions since then have been brought on by sharp cutbacks in spending by households, with housing and consumer durables among the most sensitive sectors. the recent experience was clearly different. consumer spending and residential investment were both relatively well maintained throughout 2001, even as firms cut employment and stock market losses eroded household wealth. despite only modest increases in nominal wages and salaries, households'real disposable income was supported by tax cuts and lower inflation. in addition, low interest rates helped promote spending. as you know, consumers took advantage of falling mortgage rates to buy new homes, to refinance their existing mortgage debt, and to tap into their increasing home equity to pay off more expensive debt or to finance spending on other things. as a result, the contraction in real gdp during the first three quarters of 2001 turned out to be quite shallow despite the disruptive economic fallout from the horrific events of september 11. by early last summer, economic recovery appeared to be under way. real gdp increased at an annual rate of roughly 3 - 1 / 2 percent over the first three quarters of the year. businesses seemed to have brought their inventories into better alignment with sales, and employment began to rise again, though the gains were too small to make a dent in the unemployment rate. a particularly encouraging development, given the nature of the downturn, was that the contraction in business investment appeared to be slowing while household spending, still supported by low interest rates and gains in real disposable income, continued to trend up. although the government statistics were looking a bit better, signs appeared over the summer that the economy's resilience would be tested by several new shocks. as a banker who experienced several previous economic downturns, i know that whatever weaknesses exist in our economy become problematic at the low point of the economic cycle. at such times, we typically see loan losses and evidence of weak business models. what emerged in early 2002 was not what i had expected. the enron and worldcom scandals raised serious concerns about the adequacy of the corporate governance system and tended to cloud the outlook for business expansion. abroad, mounting tensions with iraq were beginning to take their toll on consumer and business confidence. the stock market moved down again, conditions eroded in corporate debt markets, and risk spreads widened. as we moved into the fall, industrial production faltered, and business investment