– particularly the need to avoid programs that give borrowers who can make their payments an incentive to default – is difficult. but realistic public - and private - sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment. the federal reserve's homeownership and mortgage initiatives i would like to say a few words about the federal reserve's efforts to strengthen homeownership and reduce preventable foreclosures. the federal reserve's decisions regarding monetary policy and our efforts to increase financial stability affect housing and mortgage markets, of course. but, as an organization with a national presence in the form of regional federal reserve banks and their branches, we are also working to address these issues more directly. we are collaborating with other regulators, community groups, policy organizations, lenders, and public officials to identify ways to prevent unnecessary foreclosures and their negative effects on local economies. our efforts have taken a variety of forms. first, we have employed economic research and analysis, a particular strength of the federal reserve, to increase the sum of knowledge about mortgage and housing issues. for example, we are providing community leaders with detailed analyses identifying neighborhoods at high risk of foreclosures, analogous to the heat maps i showed you this evening. 9 these analyses have helped community organizations better focus their scarce resources, such as deciding where to target counseling services or other intervention efforts. a federal reserve system work group has prepared overviews of the current state of knowledge about housing and mortgage markets, and further research is currently under way to fill in the most important analytical gaps. second, we are collaborating with interested parties across the country, taking advantage of our national presence and our existing relationships with local lenders, community groups, government officials, and other stakeholders, to take practical steps to address the causes and consequences of foreclosures. for example, i mentioned earlier the destabilizing effects foreclosures have on neighborhoods, resulting from factors such as decreased home values and deterioration of vacant properties from neglect. to help address this problem, the federal reserve is joining in a partnership with the nonprofit neighborworks america to develop materials, tools, and training programs to help communities and others acquire and manage vacant properties. the goal is to support the provision of affordable rental housing and new homeownership opportunities in low - and moderate - income neighborhoods. federal reserve banks and branches have also hosted numerous meetings and workshops to bring together

risks in proposed transactions or products. in order to be effective signals, though, the fact of these rewards, and the standards under which they were granted, need to be transparent. punishment systems provide the complement of negative incentives to the positive incentives created by compensation and promotion practices ( even where qualified by clawback or similar provisions ). here the role of the government differs. with respect to positive incentives, regulators affect individuals only by way of requirements or expectations for firms. when it comes to disincentivizing egregious bad behavior, however, the government can play a more direct role. because of the required standard of proof and other constitutional protections, criminal prosecutions of individuals are harder to bring successfully institute of international finance ( 2009 ), compensation in financial services : industry progress and the agenda for change ( washington : iif, march ). see board of governors of the federal reserve system, office of the comptroller of the currency, office of thrift supervision, and federal deposit insurance corporation ( 2010 ), “ federal reserve, occ, ots, fdic issue final guidance on incentive compensation, ” press release, june 21. bis central bankers ’ speeches than criminal prosecutions of firms. but, as i think was learned decades ago when individuals were criminally prosecuted and imprisoned for antitrust law violations, it is difficult to imagine a more effective deterrent to such conduct. banking regulators do not have criminal enforcement powers, of course. but we can, and do, require dismissal of employees as part of our enforcement actions against firms. and we do have the authorities to remove malefactors from their positions in any institution that we regulate and to prohibit them from working in the banking industry. somewhat like criminal prosecutions, these are not easy cases to make. but it is important that we be willing to expend the resources to initiate such actions in appropriate cases. for quite some time, large banking organizations usually dismissed employees who had engaged in significant misconduct or exercised very bad judgment in a quiet, almost surreptitious way. this was particularly true of someone in a responsible position, who would be ushered out the door discreetly, with no recognition internally or externally of the fact of dismissal, or the reasons behind it. frequently, this person would turn up at another financial firm not long thereafter. the dismissing firm ’ s reasoning was that any public awareness of the dismissal could hurt the reputation of the firm and perhaps cause customers or counterparties to rethink