not their terror. for sure, different regulatory regimes could have different answers regarding the best way to enforce laws and regulations. as law professors teaching both the substance of law and the practice of law, i imagine you find ways within your courses and scholarship to discuss theories of enforcement – for example, the use of private rights of action versus enforcement by regulatory agencies ; different enforcement tools such as memoranda of understanding, consent orders, and cease and desist agreements ; how these different enforcement tools are sequenced ; and whether and when violations of law should be publicized. in answering all of these questions, there is consensus that public enforcement should be used in addressing pervasive regulatory problems. today i want to talk about how home mortgage foreclosures hurt the pace of an economic recovery, and how important it is that the severe misconduct that has been uncovered in the mortgage servicing sector be addressed through intensified public enforcement of the law as part of the overarching effort to rebuild our damaged communities and neighborhoods. bis central bankers ’ speeches mortgage servicing and the economy the economic downturn that began in late 2007 and worsened considerably in the autumn of that year resulted in the worst recession in many decades. although recovery from the recession officially began in the third quarter of 2009, the pace of recovery has been modest, resulting in an unemployment rate that has remained at or above 8. 5 percent since mid2009. this sustained high unemployment rate – with all the attendant social consequences, including lost income and family strains – has contributed to an unprecedented number of mortgage foreclosures throughout the nation. this wave of foreclosures is one of the factors hindering a rapid recovery in the economy. traditionally, the housing sector, buoyed by low interest rates and pent - up demand, has played an important role in propelling economic recoveries. the increase in housing sales and construction often is accompanied by purchases of complementary goods, like furniture and appliances, which magnify the effect of the housing recovery. however, six years after house prices first began to fall, the pace of the economic recovery remains slow. nationally, house prices have fallen by nearly one - third since their peak in the first quarter of 2006, and total homeowners ’ equity in the united states has shrunk by more than one - half – a loss of more than $ 7 trillion. the drop in house prices has had far - reaching effects on families, neighborhoods, small businesses, and the economy, in part because so

of capital have been found to reduce business investment, although the size of the effect is less well identified statistically and more controversial among economists than the effect of output growth mentioned previously. a practical question is whether business investment should be forecast as an aggregate quantity or broken down in some way and forecast component by component. the board staff have found a significant benefit, in terms of reduced forecasting error both in and out of sample, in modeling investment by asset class - for example, in forecasting investment in computers separately from investment in other types of equipment, or investment in office buildings separately from investment in drilling rigs. i will give a concrete example of the advantages of disaggregated forecasting in a moment. the board staff's econometric models of investment have performed well over the years. however, business investment can be highly volatile from quarter to quarter, a fact that makes forecasting misses - sometimes quite large ones - simply inevitable. a major reason that investment can sometimes be hard to predict is the inherently forward - looking and subjective nature of investment decisions. when firm managers are highly optimistic about the potential of a new technology, a new product, or a new market, for example, they are likely to invest aggressively, almost independently of the level of interest rates and similar " fundamentals. " but likewise, if beliefs become more pessimistic, investment can fall significantly, even when financing is easy. keynes referred to the sometimes rapid changes in mood of business leaders as " animal spirits. " reasonable people can disagree about the importance of this phenomenon in general, but we seem to have seen more of it lately than usual. recognizing the subjective nature of the investment decision, the staff makes substantial efforts to gather information about management expectations, as reflected for example in analyst earnings projections, surveys, industry reports, interviews, and the like. particularly at turning points, this type of information may provide important additional insights into the likely course of investment spending. i close this brief survey of forecasting at the board by emphasizing that the staff forecast is just that the staff's. monetary policy decisions are made by twelve of the nineteen members of the federal open market committee : the seven members of the board of governors, the president of the federal reserve bank of new york, and four of the remaining eleven reserve bank presidents, among whom the vote rotates annually. i suspect that, at any given meeting of the fomc, virtually every member of the committee disagrees with some aspect of