, most banking organizations in this group are overwhelmingly recognizable as traditional commercial banks ( though a few do have significant capital market or other activities ). it is with this similarity in mind that some executives of some pretty sizable banks have described their institutions to me as essentially a community bank, but with a bigger balance sheet. but there are at least two reasons why the aims for prudential regulation of such institutions might reach beyond conventional microprudential purposes. first, some at the higher end of this range may have a large enough systemic footprint that their stress or failure could have material effects on the rest of the financial system, though less than the liscc firms. second, more than one - third of u. s. commercial banking assets are held by these 80 banks. if a number of these banks simultaneously came under pressure or failed, a bis central bankers ’ speeches harmful contraction of credit availability in significant regions or sectors of the economy could ensue, even if there were little chance of a financial crisis. thus, particularly to the degree that there are correlations in the risks associated with loans held across such institutions, there should be a macroprudential objective in the regulation of at least some of these firms. of course, i would not lump all 80 of these institutions into the same category for purposes of specifying the aims of regulation. in particular, only a small fraction of these firms have a significant enough systemic footprint that their stress or failure would impose sizable negative externalities on the rest of the financial system. and the lines delineating the possible categories are not as easy to draw as for community banks and liscc firms. nonetheless, i will suggest in a few moments some possible classifications for this group of banks, along with examples of the varying regulations that might apply. rationalizing the regulatory framework the preceding observations have portrayed the prudential regulatory framework as one that should be constructed with different aims in mind. with respect to all depository institutions, this framework maintains the traditional aim of protecting the dif and limiting the use of insured deposits to engage in nonbank activities. with respect to banks of a certain size – even those predominantly involved in conventional lending activities – a macroprudential aim should be added. finally, with respect to banking organizations of such size and complexity that serious stress or failure could pose risks to the entire financial system, a financial stability aim should be the basis for additional forms of regulation. as suggested in section 165 of dodd - frank,

for release on delivery 5 : 00 p. m. edt march 27, 2023 implementation and transmission of monetary policy remarks by philip n. jefferson member board of governors of the federal reserve system at the h. parker willis lecture washington and lee university lexington, virginia march 27, 2023 thank you very much for inviting me to be part of the h. parker willis lecture series. as you know, dr. willis was a distinguished professor here at washington and lee university. among many other accomplishments, he helped create the federal reserve system. he served as the first secretary to the federal reserve board from 1914 to 1918 and later as the first research director. before i go further, let me remind you that the views i will express today are my own and are not necessarily those of my colleagues in the federal reserve system. many discussions of monetary policy simply talk about the federal reserve setting the federal funds rate to promote our goals of maximum employment and price stability, without giving attention to the specific actions we take to put the federal funds rate where we want it — that is, to the way we implement monetary policy. and even in economics classes that cover this topic, the teaching materials have not always caught up with the fact that we have purposely changed our implementation framework over the past decade. 1 my colleagues at the fed are working with educators to close the curriculum gap, and i hope this lecture will further help this endeavor. 2 in honor of dr. willis ’ s important contributions to the design and creation of the federal reserve, today i would like to talk to you about how the fed currently uses a specific set of tools to implement monetary policy and how monetary policy is transmitted to the economy. then, i will offer some concluding remarks. see the npr interview with jane ihrig and scott wolla ( 2022a ). some of the teaching materials that jane ihrig and scott wolla have created to close the curriculum gap are available on the federal reserve bank of st. louis ’ s website at https : / / www. stlouisfed. org / education / teaching - new - tools - of - monetary - policy. for more information, please see ihrig and wolla ( 2022b ). - 2the federal funds market and the fed ’ s policy target range as mandated by the u. s. congress, the federal open market committee ’ s ( fomc ) objectives are to promote maximum employment and price stability. the members of the board of governors and