that the government have the ability to execute the resolution seamlessly and with little or no warning – for example, bear stearns informed the fed on a thursday that it would default on friday. 8 there are nonetheless three major sources of concern about potential weaknesses in the new framework for financial crisis management that has been introduced since the great financial crisis. the first is its failure to resolve the problem of stigma – that is, the stigma of borrowing from the central bank at a time when the financial markets are on guard, looking for signs of weakness in individual financial institutions at a time of overall financial stress. 9 indeed, some of the dodd - frank act reporting requirements may worsen the stigma problem. 10 the second is a concern that arises from the nature of financial and other crises. it is essential that we build strong frameworks to deal with potential crisis situations, and doddfrank has done that. but these plans need to ensure that the authorities retain the capacity to deal with unanticipated events, for unanticipated events are inevitable. retaining the needed flexibility may conflict with the desire to reduce moral hazard to a minimum. but, in simple language : strengthening fire prevention regulations does not imply that the fire brigade should be disbanded. 11 third, this concern is heightened by a related problem : the new system has not undergone its own stress test. that is, in one sense, fortunate, for the financial system will undergo its fundamental stress test only when we have to deal with the next potential financial crisis. that day will likely come later than it would have without dodd - frank and the excellent work done by regulators in the united states and around the world in strengthening financial institutions and the financial system. but it will come, and when it comes, we will need the flexibility required to deal with it. see board of governors of the federal reserve system ( 2008 ), “ report pursuant to section 129 of the emergency economic stabilization act of 2008 : loan to facilitate the acquisition of the bear stearns companies, inc. by jpmorgan chase & co. ( pdf ) “ ( washington : board of governors ). this concern is emphasized in ben bernanke ’ s blog post, “ fed emergency lending, ” brookings institution, december 3, 2015. in particular, as i suggested earlier, the additional reporting requirements under the dodd - frank act could increase potential borrowers ’ concerns that the public, their creditors, or their counterparties could learn about their borrowing and conclude that the bank

7 finance ministers and central bank governors ( basel : financial stability forum, april ), p. 8 ; and fsf working group on market and institutional resilience ( 2008 ), report of the financial stability forum on enhancing market and institutional resilience ( basel : fsf, october ), p. 47. bis central bankers ’ speeches that aside, the fed ’ s ability to act as lender of last resort to insured depository institutions was not significantly impeded by the dodd - frank act. the shadow banking system during a crisis, liquidity pressures can materialize in the shadow banking sector – that is, the set of nonbanks that use a range of markets and instruments to provide financing to borrowers. at the time of their initial difficulties, both bear stearns and lehman brothers were in the shadow banking system. to help improve the resiliency of this sector, a few new regulations have been introduced, including the final rule on risk retention in securitization issued jointly by the federal reserve and five other agencies in october 2014 and the new money market fund rules issued by the securities and exchange commission ( sec ) in july 2014. other provisions implemented since the crisis that should help address risks in the nonbank segment of the credit system include the central clearing requirement for standardized over - the - counter derivatives and margin requirements for uncleared swaps, as well as disclosure requirements that provide investors with standardized loan - level information for securitizations backed by certain assets, including residential and commercial mortgages. 3 more recently, the sec has also proposed rules to modernize data reporting by investment companies and advisers, as well as to enhance liquidity risk management and disclosure by open - end mutual funds, including exchange - traded funds. in addition, the federal reserve can, if needed in an emergency, and with the approval of the secretary of the treasury, lend through a broad - based facility, including to nonbanks, to provide liquidity to financial markets. indeed, during the financial crisis – which can be thought of as an old - fashioned bank run, but on the shadow banks – the fed ’ s credit facilities were used in an effort to stop the run in the shadow banking system. such broad - based facilities were instrumental in ensuring that money market mutual funds were able to liquefy their assets and so meet investor withdrawals, that the markets for critical short - term funding remained open, and that funding remained available for securitizations that