##p. again, we do not know enough about what those modifications look like or how they are being structured. prior to hamp, many servicers were creating modifications that themselves were problematic. for example, high percentages of the pre - hamp modifications provided no payment relief to borrowers and, not surprisingly, then exhibited high re - default rates. servicers may not be doing everything they can do to ensure that loss mitigation activities, including hamp and non - hamp modifications, are responsible and sustainable and subject to strong internal controls. so the problems that have been grabbing headlines in recent weeks are neither new nor amenable to quick fixes. while there may be some specific practices – “ robo - signing ” among them – that are possible to isolate and eliminate, chronic, uncured problems continue to plague this industry. there is a long track record of actions and cases brought by attorneys general, which some of you in this room have no doubt litigated, demonstrating the harm done to consumers by sloppy or unscrupulous practices. because consumers cannot choose to hire or fire their servicers ( other than by paying off the loan ), the industry lacks the level of market discipline imposed in other industries by the working of consumer choice. for this reason, if servicers do not actively maintain adequate and trained staff and do not establish and heed internal controls, if investors do not monitor their servicers ’ behavior, if regulators do not conduct meaningful examinations, if courts do not stand guard against unfair practices, both substantive and procedural, then it will be much less likely that a wellfunctioning housing market will reemerge from this crisis. because the very structure of the loan servicing industry as it currently operates inevitably leads to misaligned incentives and a propensity to defer costly investments, a more significant re - thinking of the basic business model must also be undertaken if we are to avoid repeating prior mistakes. i realize that i ’ m painting a rather gloomy picture. but be assured that i do believe that we can make real progress on the ground through coordinated public and private action. let me conclude by talking a little bit about what the federal reserve and others are doing to address these issues. although foreclosure practices have traditionally been – and rightfully should remain – a domain of the states, the federal reserve has been expanding its expertise in working with the industry – first, in a review of non - bank subsidiaries in conjunction with other state

time, and since then has initiated a turnaround in the business model of the bank. before that, vikram had a long successful career in other financial institutions, including morgan stanley and citi itself. alessandro profumo has been ceo of unicredit group since it was founded in 1997. unicredit group can probably be qualified as the quintessential european cross - border banking group, with operations in 22 european countries and, amongst these 22, in 19 central and eastern european countries. alessandro is also the president of the european banking association. the last 2 to 3 years have been especially eventful for financial integration and stability, with once in a life - time developments. after lehman brothers filed for bankruptcy in september 2008, the global financial system experienced unprecedented stress and policy makers had to tread unknown territory in dealing with it. the financial crisis has raised a host of policy issues that will provide food for reflection for generations to come. i will mention a few of them to set the scene and to kick - start the discussion. the first set of issues relate to the developments in the late nineties and early 2000s. the combination of high economic growth, ample liquidity, increasing financial integration and development, and “ light handed ” regulation sewed the seeds of the crisis to come. i believe that a number of people and organisations, including mine, identified vulnerabilities in the financial system before the crisis erupted. nevertheless, we did not anticipate the timing and the intensity. we should ask ourselves what we missed in the run - up to the crisis and what the lessons are for the future. once the crisis erupted in full force, a first casualty were the money markets, which provide the oil to make the banking system run smoothly. money markets came to an unprecedented stand - still. because they are so closely linked to monetary policy, they had shown signs of almost full integration right after the introduction of the euro. but with the crisis, a degree of re - segmentation took place again along national borders ; and the eurosystem had to step in to take on the intermediation role that these markets play in normal times. another set of issues relate to banking. banks expanded both across borders and financial sectors, often combing commercial banking, investment banking and insurance business in one and the same group. the two groups whose ceos are in the panel are clear examples of this evolution. but cross - border integration of rules and prudentials, including the