the comptroller of the currency, and the federal deposit insurance corporation — to encourage banks to help meet the credit needs of the communities they are chartered to serve, including low - and moderate - income neighborhoods. to complement the work we do with the other regulators to write regulations and guidance implementing cra, the federal reserve system ’ s community development staff help banks understand and meet their responsibilities under the law. fed staff members also act as liaisons between banks and community organizations to identify local community development needs and solutions. i know that you all are very interested in the agencies ’ activities related to possible revisions to the current cra regulations. my colleague, governor brainard, who represents the board in our interagency cra discussions, will be speaking to you tomorrow, so i will leave it to her to discuss our efforts in detail. but i do want to express my support for an interagency effort to revise the regulations to promote clarity and consistency in our evaluations of banks, particularly in light of the changes in the way bank products and services are delivered. we value the cra ’ s role in meeting the credit needs of low - and moderate - income neighborhoods and want to be very careful that any revisions serve to strengthen the cra ’ s purpose. 1 / 2 bis central bankers'speeches i commend your dedication to ensuring that all americans have fair access to the economic opportunities that our nation offers. i hope you have a productive conference, and i look forward to our ongoing conversation about how the federal reserve can help. 2 / 2 bis central bankers'speeches

a second question is, how we can structure these requirements and other aspects of regulation to damp, rather than reinforce, the natural procyclical tendencies of the financial system? among the challenges will be encouraging firms and supervisors to comfortably allow buffers to be eroded in bad times. interestingly, prompt corrective action under the federal deposit insurance corporation improvement act of 1991 was intended, in part, to induce an element of countercyclical behavior by banks. it gives banks an incentive to build excess capital – on both a risk - based and leverage ratio basis – in good times to avoid prompt corrective action when circumstances are less favorable. now that we are in the latter state of the world, a study of how commercial banks are viewing capital ratios, including the leverage ratio, could inform consideration of the morris and shin proposal. the morris and shin paper also provides a framework for thinking about the federal reserve's credit facilities. on page 9, they note that liquidity makes borrowers feel more robust and lenders less likely to withdraw, raising the odds for a more stable equilibrium for the entire system. that is exactly what we have been trying to do with our various discount lending facilities. the assurance of the availability of liquidity to sound institutions against good collateral should counter the greater uncertainty and risk aversion that have impaired normal arbitrage and intermediary functions by making those institutions more willing to extend credit and take positions in the process of making markets. it should also assure other creditors of those institutions that illiquid markets will not impede the repayment of their loans, and therefore make them more willing to keep lending. a number of markets remain disrupted and illiquid. but i believe that they would have been even more illiquid and the risk of disruptive runs even greater without our various facilities ; that's certainly what market participants are telling us. jan hatzius is trying to gauge the combined effects on spending of the losses generated by the effects of the decline in housing prices outlined in the case paper and the impulse for deleveraging in the financial sector inherent in the processes discussed by morris and shin. to restore capital ratios depleted by mortgage losses and to raise those ratios even further in order to reduce leverage to safer levels demanded by counterparties, banks and other lenders need to reduce assets. they do so by tightening terms and standards across a broad array of credit – and we have seen this behavior reflected in our surveys of bank lending officers and in various