our review progresses. of course, we may find that the preferred approach is modest enhancements to the tools that proved their worth during the crisis. listening now, how does today ’ s event fit into all of this? just as the federal reserve bank of richmond is sponsoring today ’ s event with representatives of its local community, so too are other reserve banks sponsoring similar events. we are making sure to hear from people across the country. we will also hold a national - level conference in chicago in june. and, in addition to presentations from prominent outside experts, we made sure to add panels to hear from community organizations, training institutions, and other groups that can give us insights on how monetary policy is affecting main street. since i arrived at the fed, i have put a premium on visiting communities all over the country to get a direct sense of how they are experiencing the economy. in fact, my first such visit was in this district with community development staff from the federal reserve bank of richmond. due to the wisdom of the fed ’ s original architects, the federal reserve system derives tremendous value from interacting with communities from all around the country. in 2015, we created a community advisory council at the federal reserve board, where we hear from a broad variety of community groups and others. and many of the regional federal reserve banks have similar councils, including the richmond fed ’ s community investment council. in our review this year, we are listening broadly and are seeking perspectives at the community level. so today we want to hear from you. how is your community experiencing today ’ s economy? is everyone who wants a job able to get one? can they get the necessary training? are businesses finding it relatively easy to hire the workers they need? what about inflation and pricing power? and what about the availability and cost of credit — whether it be to start or expand a small business, buy a car to get to work, or invest in owning a home or getting a degree? i look forward to hearing your views on these and other questions. 1 i am grateful to john roberts of the federal reserve board for his assistance in preparing this text. these remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. 2 janet l. yellen, “ revolution and evolution in central bank communications, ” remarks at the haas school of business, university of california, berkeley, berkeley, california, november 13, 2012. richard h. clarida, “

that libor behaved quite differently from rates with no credit risk embedded in them, such as risk - free rates. libor is a less - than - ideal rate for most derivatives contracts and secured borrowing because movements in the credit risk component do not reflect well the underlying risks of the actual question asks banks only about transactions of “ reasonable market size ”. this size is not defined and is left to banks ’ judgment. bis central bankers ’ speeches those contracts. however, libor ’ s pervasiveness has become self - reinforcing. firms use libor in contracts, even when it is less than ideal, because they know they can hedge the resulting risk using highly liquid, libor - based interest rate swaps or other derivatives contracts. and those derivatives markets are so liquid because most market participants use libor as the reference rate in their financial contracts. because of the progression of this dynamic over time, and not because of some careful design, libor has spread well beyond its intended uses and become an important pillar of the global financial system – perhaps too important. in recent years, two separate developments have called into question the wisdom of that arrangement. i have already mentioned the first one – the emergence of a pervasive pattern of attempted manipulation of libor dating back many years. this misconduct was designed either to increase the potential profit of the submitting firms or to convey a misleading picture of the relative health of such firms. since 2012, seven financial institutions have settled related charges with the u. s. commodity futures trading commission and the u. s. department of justice, and the cumulative penalties and fines paid in the united states now stand at more than $ 3 billion. 8 global penalties paid related to benchmark misconduct exceed $ 6 billion as investigations into reference rate manipulation continue. although these penalties and fines are themselves substantial, to my mind the longer - term damage to the public ’ s trust represents the greater cost of this misconduct. a second problem is that unsecured interbank borrowing has been in a secular decline that predates the global financial crisis. changes in bank behavior following the crisis exacerbated the decline and further weakened the foundation of libor. the result is a scarcity, or outright absence in longer tenors, of actual transactions that banks can use to estimate their daily submission to libor. ongoing regulatory reforms and the shift away from unsecured funding raise the possibility that unsecured interbank borrowing transactions may become even more infrequent in