of supervision and enforcement can cause problems, even when institutions are ostensibly following the same regulations. nowhere was this more evident than in the mortgage origination market, in which banking organizations and firms outside the banking supervision system were all originating mortgages but were subject to very different levels of oversight. • i believe in the separation of banking and commerce. the lending policies of banks should have as their purpose the efficient channeling of savers'funds to their most productive uses. the allowance of banks to affiliate with commercial firms threatens the ability of banks to continue to serve as efficient and objective intermediaries of credit and has the potential to expose banks to the operational, financial, and reputational risks of commercial affiliates. it also has the potential to extend to commercial affiliates the federal safety net afforded to banks in recognition of their role in the economy. • i believe that a bank holding company should act as a source of financial and managerial strength to its banking subsidiaries. that is, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity, and it should maintain the financial flexibility and capital - raising capacity to obtain additional resources for assisting its subsidiary banks. the reasoning behind these functions is that a bank holding company derives certain benefits at the corporate level that result, in part, from the ownership of an institution that has access to the federal safety net, including deposit insurance. this principle is, naturally, very familiar to almost all bankers, since it is embedded in federal reserve regulation, but it is worth repeating from time to time. • finally, i believe that strict adherence to consumer protection is necessary to protect consumers and the financial system as a whole. we have now witnessed the severe consequences of inadequate consumer understanding of financial products and of lending to consumers without regard to their ability to sustain the payments. reasonable regulations, such as the federal reserve's recent rule changes for mortgages and credit cards, can help protect consumers and encourage responsible lending. much of my time is currently absorbed by activities related to this last point, as well as the broader housing and mortgage crisis. in addition to my board committee assignments, i represent the fed on the oversight board of the hope for homeowners ( h4h ) program, an fha program created by the congress that allows lenders to refinance a delinquent borrower into an fha - insured fixed - rate mortgage if the lender and borrower agree to certain

envisaged in the original design. the single resolution fund has been created but the resources contributed by the banks, initially subdivided by country, will not be pooled for some time ; and no clear determination to use it has transpired. the single deposit guarantee system has not yet been finalized ; the european commission recently presented a proposal, it too envisaging a lengthy period of transition. in both cases there is no provision for a european public financial backstop, which has been called for since the 2012 report and is necessary to guarantee that banking union has the capacity to safeguard systemic stability. in discussion and in the political debate, the theme of prudential requirements against sovereign exposures is often linked with that of the completion of banking union, on the grounds that risks have to be reduced before they can be shared. the issue needs to be addressed with no preconceived opinions, and without taking hasty decisions that could aggravate rather than mitigate risks. there is no consensus on the overall advantages of the various reform options : furthermore, experience teaches that transitions originally intended as gradual are often suddenly speeded up by the market. in any case, the issue needs to be resolved in a coordinated way at global level and in the proper institutional fora. bis central bankers ’ speeches poor compliance with fiscal rules in the period preceding the crisis justified their being strengthened, but these last few years have demonstrated how important it is to enforce them taking account, as foreseen by the rules, of exceptional circumstances and the concurrent implementation of longer - term intervention. at the beginning of last year the european commission established the conditions for applying the flexibility clauses of the stability and growth pact, which can allow national budgets to perform the function of macroeconomic stabilization, at least in part, when necessary. however, not all contingencies can be foreseen ; the commission is often compelled to interpret the margin for flexibility provided by the rules in an unavoidably discretionary manner. a common budget, which can only be achieved by further transfers of national sovereignty and an adequate strengthening of the democratic legitimacy of supranational institutions, would make it possible to implement policies consistent with the cyclical conditions in various economies and in the euro area overall, promptly and with no doubts as to their legitimacy. the single currency needs to interact with a single fiscal policy. to be effective, a fiscal union requires the introduction of common debt instruments and, at the same time, decisions on the treatment of pre