stringent, forward - looking assessment of prospective losses and revenues at the 19 largest u. s. regulated financial institutions. we took the unusual, if not unprecedented, step of releasing publicly the methodology and findings of the scap, including the capital needs and loss estimates for the 19 institutions. the decision to make this information public was made in the context of a systemic crisis, in which markets were hungry for information and in which the treasury stood ready to inject capital into any of the 19 institutions that were found to need it. even so, it was much debated within the federal reserve, in part because of concerns that weaker banks might be significantly harmed by the disclosures. but i think that regularizing both stress tests and the release of information relevant to them deserves serious consideration for at least two reasons. first, in line with my earlier discussion of market discipline, releasing such information could assist investors in the difficult task of valuing loan portfolios that at present are not very transparent. second, releasing details about assumptions, methods, and conclusions would expose our supervisory approach to greater outside scrutiny and discussion. whether the result is critique or validation of our approach, the reaction of informed investors and analysts to our assumptions and methods would be beneficial. i have previously identified several ways we might increase the transparency of our stress tests. 2 there are doubtless additional possibilities. there are, to be sure, countervailing concerns. in economic times more normal than those prevailing when we conducted the scap, market participants will not be fearing the worst and banks will not have access to government capital injections as a backstop. at such a moment, the revelation that some major banks may have capital needs under a stress scenario might be unnecessarily destabilizing, though the possibility of this kind of market reaction may be lower if such information is released frequently. major unpleasant surprises would be less likely with see daniel k. tarullo ( 2010 ), “ lessons from the crisis stress tests ”, speech delivered at the federal reserve board international research forum on monetary policy, washington, march 26. frequent, detailed disclosures. in any case, i hope that interested parties will consider the merits of these possibilities and help advance the debate. there are other ways to incorporate non - governmental views into the regulatory system. we have already taken steps in this direction in conjunction with the federal reserve ’ s overhaul of its approach to supervising the largest financial holding companies. as part of this effort – and with the aim

- the war of 1812, the depression of 1819 - 20, and the panic of 1837 - - produced waves of failures. what should be emphasized, however, is the stability of banking in the absence of severe macroeconomic shocks, a stability that reflected the discipline of the marketplace. a bank ’ s ability to circulate its notes was dependent on the public ’ s confidence in its ability to redeem its notes on demand. then, far more than now, there was competition for reputation. the market put a high value on integrity and punished fly - by - night operators. when confidence was lacking in a bank, its notes tended to exchange at a discount to specie and to the rates of other, more creditworthy banks. this phenomenon was evident as early as the late 1790s in boston, where large amounts of notes issued by new england country banks circulated. in 1799 the boston banks agreed to accept notes of certain country banks only at discounts of one - half percent. several years later they began systematically sending back country notes for redemption, and they eventually refused for a time to accept such notes, even at a discount. early in the 1800s private money brokers seem to have made their first appearance. these brokers, our early arbitrageurs, purchased bank notes at a discount and transported them to the issuing bank, where they demanded par redemption. difficulties in redeeming the notes of new england country banks eventually produced the first notable example of cooperative self - regulation in american banking, known as the suffolk bank system. the suffolk bank was chartered in 1818 and entered the business of collecting country bank notes in 1819. in effect, the suffolk bank created the first regional clearing system. by doing so, it effectively constrained the supply of notes by individual banks to prudential levels and thereby allowed the notes of all of its associated banks to circulate consistently at face value. in the 1830s, there was a large expansion of state - chartered banks, many of which were severely tested and found wanting during the panic of 1837. however, very few banks failed in new england, where the suffolk bank continued to provide an effective, and entirely private, creditor discipline. free banking ( 1837 - 1863 ) the intense political controversy over the charter renewal of the second bank of the united states and the wave of bank failures following the panic led many states to fundamentally reconsider their approach to banking regulation. in particular, in 1838 new york introduced a new approach, known as free banking,