flow of credit – serious financial instability imposes disproportionately large costs on the broader economy. the rationale for public investment in the financial industry is not, therefore, any special regard for managers, workers, or investors in that industry over others, but rather the need to prevent a further deterioration in financial conditions that would destroy jobs and incomes in all industries and regions. that said, the public is entitled to demand that policymakers take near - term, concrete actions to ensure that we do not face a similar crisis in the future. an important part of those actions should be to create a stronger supervisory and regulatory system in which gaps and unnecessary duplication in coverage are eliminated, lines of supervisory authority and responsibility are clear, and oversight powers are sufficient to curb excessive leverage and risk - taking, particularly in systemically critical institutions. the federal reserve stands ready to work closely with the congress to achieve meaningful and effective regulatory reform. thank you. i would be pleased to take your questions.

would have the government share the cost when the servicer reduces the borrower's monthly payment. the second category of foreclosure prevention plans takes a less streamlined but more deliberate approach, with the goal of increasing the proportion of loan modifications that borrowers will be able to sustain over the longer term. the tradeoff is that the more deliberate approach would likely result in relatively fewer mortgages being modified. one example of a plan that puts greater emphasis on achieving sustainability would have the treasury use tarp funds as working capital to buy delinquent mortgages from lenders and investors at steep discounts to their remaining balances, through negotiations or through reverse auctions. the acquired mortgages would then be re - underwritten and modified as appropriate to meet the criteria for refinancing into hope for homeowners ( h4h ) or other government programs. especially if the congress moves forward on a plan of this type, it should examine the possibility of enhancing the h4h program to make it a more effective vehicle for this effort. a second broad use of new tarp funding, besides foreclosure mitigation, would be to support programs to help restart key credit markets. the treasury and the federal reserve recently announced such a program, the term asset - backed securities loan facility, which is designed to stimulate securitization activity in the market for asset - backed securities collateralized by a range of consumer and small business loans. 2 under this program, which is expected to begin operation next month, the federal reserve will lend for up to three years on a nonrecourse basis against asset - backed securities. by providing this financing, the program should increase the availability of credit to households and small businesses. the federal reserve will be protected from credit losses by lending amounts less than the market value of the financed security – that is, by applying a " haircut " – and by the $ 20 billion of capital provided by the tarp. if the program is successful, the program could be see board of governors of the federal reserve system, fdic, office of the comptroller of the currency, office of thrift supervision ( 2008 ), " interagency statement on meeting the needs of creditworthy borrowers, " joint press release, november 12. see board of governors of the federal reserve system ( 2008 ), " federal reserve announces the creation of the term asset - backed securities loan facility ( talf ), " press release, november 25