past half - century, but a related measure - the extent to which savers reach beyond their national borders to invest in foreign assets - has also risen. through much of the post - world war ii years, domestic saving for each country was invested predominantly in its domestic capital assets, irrespective of the potential for superior risk - adjusted returns to be available from abroad. because a country ’ s domestic saving less its domestic investment much of what is assembled in final salable form in the united states, for example, may consist of components from many continents. companies seek out the lowest costs of inputs to effectively compete for their customers ’ dollars. this international competition left unfettered, history suggests, would tend to direct output to the most efficient producers of specific products or services and, hence, maximize standards of living of all participants in trade. given the skills and education of its workforce and a number of institutional factors, such as its legal structure, each economy will achieve its maximum possible average living standard. this had not always been the case. for example, wage and price controls were imposed in the united states in 1971 as a substitute for a tighter monetary policy and higher interest rates to address rising inflation. is equal to its current account balance, such balances, positive or negative, with the exception of the mid - 1980s, were therefore generally modest. but in the early 1990s, “ home bias ” began to diminish appreciably, 3 and, hence, the dispersion of current account balances among countries has increased markedly. the widening current account deficit in the united states has come to dominate the tail of that distribution of external balances across countries. thus, the decline in home bias, or its equivalent, expanding globalization, has apparently enabled the united states to finance and, hence, incur so large a current account deficit. as a result of these capital flows, the ratio of foreign net claims against u. s. residents to our annual gdp has risen to approximately one - fourth. while some other countries are far more in debt to foreigners, at least relative to their gdps, they do not face the scale of international financing that we require. a u. s. current account deficit of 5 percent or more of gdp would probably not have been readily fundable a half - century ago or perhaps even a couple of decades ago. 4 the ability to move that much of world saving to the united states in response to relative rates of return almost surely would have been

status, or held as other real estate owned ( oreo ) – including all construction loans, loans secured by nonfarm nonresidential properties, and loans secured by multifamily properties – represented nearly eight percent of commercial real estate loans and related oreo at year - end 2009, and almost one - quarter of the total risk - based capital at community banks. given the risks associated with cre lending, banking agencies have for the past several years focused on assessing community bank exposures to commercial real estate and pushing institutions to enhance their risk - management processes for this segment of their portfolios. as problems surfaced we recognized that loan restructurings are often in the best for more information, see board of governors of the federal reserve system ( 2008 ), “ interagency statement on meeting the needs of creditworthy borrowers ”, press release, november 12. for more information, see board of governors of the federal reserve system ( 2009 ), “ federal reserve adopts policy statement supporting prudent commercial real estate ( cre ) loan workouts ”, press release, october 30. for more information, see board of governors of the federal reserve system ( 2010 ), “ regulators issue statement on lending to creditworthy small businesses ”, press release, february 5. interest of both the bank and the borrower and encouraged banks to explore opportunities to work with their borrowers to appropriately restructure problem loans. my recent conversations with bankers have been heavily focused on concerns about loan classification standards. some of you have told me that you feel that examiners are not always taking a balanced approach to the assessment of commercial real estate loan restructurings. on the other side of the table, i hear from examiners that they feel some banks have been slow to acknowledge declines in commercial real estate project cash flows and collateral values. the new guidance is intended to bridge this apparent gap in perceptions and to promote both prudent commercial real estate loan workouts by banks and balanced and consistent reviews of these loans by the supervisory agencies. the october 2009 cre guidance includes a number of examples drawn from common loan situations and specifies classification treatment for alternate scenarios that depend on actions taken by the bank and the borrower. as we were finalizing the guidance, i sat down with our supervision staff and went through each of the examples as if we were in a loan closing conference. based on what was discussed during those conversations and my close reading of the guidance, i think the best way to bridge the gap