to shocks from underlying risk factors, but also the financial system as a whole has become more resilient. derivatives have been used effectively by many banks to shift interest rate risks. in addition, while credit risks are transferred among financial intermediaries based on their ability and willingness to absorb such risk, increasingly credit risk has been transferred from highly leveraged financial institutions to those with much larger equity coverage. for example, not only has a significant part of the credit risks of an admittedly few large u. s. banks been shifted to other u. s. and foreign banks and to insurance and reinsurance firms here and abroad, but such risks also have been shifted to pension funds, to hedge funds, and to other organizations with diffuse long - term liabilities or no liabilities at all. most of the credit - risk transfers were made early in the credit - granting process ; but in the late 1990s and early in this decade, significant exposures to telecommunication firms were laid off through credit default swaps, collateralized debt obligations, and other financial instruments. other risk transfers reflected later sales at discount prices as specific credits became riskier and banks rebalanced their portfolios. some of these sales were at substantial concessions to entice buyers to accept substantial risk. whether done as part of the original credit decision or in response to changing conditions, these transactions represent a new paradigm of active credit management and are a major part of the explanation of the banking system ’ s strength during the most recent period of stress. even the largest corporate defaults in history ( worldcom and enron ) and the largest sovereign default in history ( argentina ) have not significantly impaired the capital of any major u. s. financial intermediary. technology technology, as i have noted, has been among the most significant factors permitting banks to adjust to the new competitive environment in making credit decisions, in measuring and managing risk, and in creating and using new instruments. technology of course, is a two - edged sword. the technology that banks use so profitably in risk measurement and management and in their dealing and underwriting activities is the same that their rivals and their customers used to deprive banks of the traditional lending business with their best customers. however, technology has also allowed banks to assess the credit and other risks of customers previously deemed too risky and, then, to extend credit profitably to such borrowers. some investment in bank technology has been largely defensive, with the gains captured mainly by customers who would otherwise

and we look forward to expanding our horizons in this respect. conclusion i wish i could conclude this wrap - up with a list of the three or four things we could do to immediately unlock small business lending. but the problems are numerous and complex and they will require creativity and persistence to solve. just because the solutions are hard to find does not mean that we shouldn ’ t keep trying. finding solutions to small business financing issues is not only an important component of the economic recovery, it is also important to the restoration of communities that have been hard - hit by foreclosures and job losses. what we have accomplished is a good beginning. we have identified some specific credit gaps and generated some ideas to tackle them. we have brought together a network of people with different perspectives and resources but a shared commitment to improving credit conditions. and we have sparked numerous research projects to further understanding of the current and ongoing credit needs of small businesses. if we continue to work together, i am sure that we can alleviate some of the problems that small businesses face. the more we do now, the better prepared our small businesses and lending institutions will be when economic growth and consumer demand pick up. thank you, again, for your participation today.