of policy. reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run. closing thoughts to conclude, the experience over the past five years highlights the enduring challenge of setting forward - looking monetary policy amid a wide and evolving range of risks and uncertainties. taking into account this experience and the lessons i have learned over my tenure on the fomc, an important question i will be considering is how to make monetary policy strategy and its related communications durable to a wide range of possible shocks and changes in the macroeconomy. we will continue to learn about the post - pandemic economy, and, if history is any guide, new shocks to and changes in the economy will eventually and inevitably occur. while the future is full of risks and uncertainties, the fomc ’ s mandate of fostering price stability and maximum employment remains very clear. restoring price stability is essential for achieving maximum employment over the longer run. thank you again for the opportunity to speak with you today. i look forward to our conversation.

real time ; for example, federal banking regulators issued new guidance on nontraditional mortgage lending and on commercial real estate lending. the federal reserve, in cooperation with the other supervisors, encouraged improvements in market infrastructure and conducted a series of targeted reviews designed to improve risk - management practice with respect to derivatives, exposures to hedge funds, leveraged lending, and other areas. and, in preparation for the new basel ii capital regulations, supervisors required more - demanding standards for the measurement and management of risk. despite these efforts, however, the risk - management systems of many financial institutions proved inadequate in the face of a major housing downturn and substantial disruptions in market liquidity. the current economic and financial situation reflects, in significant part, the unwinding of two of these longer - term developments – the housing boom and the credit boom – and the continuation of the pressure of global demand on commodity prices. the housing boom came to an end because rising prices made housing increasingly unaffordable. the end of rapid house price increases in turn undermined a basic premise of many adjustable - rate subprime loans – that home price appreciation alone would always generate enough equity to permit the borrower to refinance and thereby avoid ever having to pay the fully - indexed interest rate. when that premise was shown to be false and defaults on subprime mortgages rose sharply, investors quickly backpedaled from mortgage - related securities. the reduced availability of mortgage credit caused housing to weaken further. the losses from subprime mortgages have been significant in themselves, but their greater impact was to trigger the end of the broader credit boom. notably, as subprime losses forced the credit rating agencies to downgrade what had been highly rated mortgage - backed securities, investors also came to doubt the reliability of ratings that had been awarded to other highly complex securities. as a result, investors became much more cautious and reversed their aggressive risk - taking of the credit boom period. the resulting pullback affected a much broader range of securities, including leveraged and syndicated loans, asset - backed commercial paper, commercial mortgage - backed securities, and a variety of structured credit products. large financial institutions, especially in the united states and europe, were particularly affected by these events, having reported a total of roughly $ 300 bernanke ( 2005 ). billion in writedowns and credit losses. these institutions have also been forced to bring onto their balance sheets the assets of sponsored investment vehicles that can no longer be