2 / 10 bis central bankers'speeches financial institutions, regulation reduces the run externalities associated with private money creation. effective capital regulation and supervision are the main tools for reducing investor concerns about the banking system ’ s solvency in stressful times. in addition, fdic deposit insurance complements strong capital by reducing depositors ’ incentives to run on banks. following the financial crisis, the regulatory and supervisory framework has been extended to more directly reduce risks from swings in the supply of liquidity within the financial system. in particular, the liquidity coverage ratio ( lcr ) reduces the likelihood of runs by forcing banks to hold highly liquid assets against expected future cash outflows. 11, 12 example of money fund reform runs can also occur on nonbanks. one particularly spectacular run during the financial crisis followed lehman ’ s bankruptcy and the reserve fund ’ s “ breaking the buck ” as investors fled prime money market funds. this run was stopped dramatically by a government guarantee. recent work by some new york fed colleagues provides a real - world example of how, in normal times, new regulation can induce investors to distinguish between safe and money - like assets. 13 they used the securities and exchange commission ’ s ( sec ) recent implementation of measures to reform the mmf industry as a quasi - natural experiment to characterize investors ’ preferences for money - like assets. 14 in 2014, the sec approved a new set of rules aimed at mitigating the fragility of prime mmfs. as of october 2016, prime funds have been required under certain conditions to impose liquidity fees on redemptions or gates halting the redemption of shares. 15 additionally, prime funds offering shares to institutional investors may no longer price such shares with fixed navs ; instead, they must price their shares at the market value of the underlying securities, much like standard mutual funds. by requiring prime mmfs to adopt a system of gates and fees, the reform made them less money - like ; floating navs reduced the money - likeness of the institutional subsegment even further. 16, 17 the differential impact of the sec ’ s mmf reforms — which made prime mmfs less money - like yet not riskier — can be used to distinguish between investors ’ preferences for money - likeness and safety in normal states of the world. figure 2 shows the industry ’ s aggregate assets around the implementation of the new rules. in anticipation of implementation, more than $ 1 trillion flowed from the prime mmf sector into the government mm

all think alike. but we are united in our commitment to our dual mandate and in our belief that fed independence is essential to the public interest. that independence allows us to make tough decisions insulated from short - term political pressures. at fomc meetings, each committee member presents a current outlook for his or her region and the nation. for these assessments, we consult our researchers and add critical information that we learn from listening to our boards of directors, regional advisory councils and community leaders, such as you and others i ’ ll meet on this visit. for example, last month members of our small business advisory council told us that for the first time in several years, employees were leaving for other jobs and that they would need to replace those who left for better opportunities elsewhere. the fact that some people with jobs felt confident enough to seek and take other job opportunities was another signal to us that the job market may be improving – although, to be sure, we read such signals cautiously. bis central bankers ’ speeches to help me gather more information about the region, yesterday, i had breakfast in syracuse with business and community leaders at the center for economic development. then i met with the staff of pathstone, a community development organization, met faculty and students at the maxwell school of syracuse university and had lunch with university officials who manage the tech transfer process. in the afternoon, we drove to skaneateles falls to tour welch allyn, a manufacturer of medical diagnostic instruments. dr. julie shimer is the president and ceo. dr. shimer was also recently appointed chair of the empire state development corporation, and we talked about challenges and opportunities for economic development in new york state. after this morning ’ s gathering, i will speak with staff of the empire justice center, meet with lt. governor bob duffy, convene a meeting of our upstate advisory board, whose members are major leaders in the upstate economy, and visit the roswell park cancer institute to learn about their role in economic development in western new york and in the broader world arena. my colleagues and i at the new york fed continually track conditions in our district, and we have created a number of tools for that purpose. for example, my staff produces monthly indexes of economic activity for new york city, the state of new york and new jersey. these indexes are essentially measures of local output – similar to gross domestic product, or gdp, at the national level. these measures provide a more complete gauge of activity than the