reasonable deferral period. consider, for example, how different the incentive compensation packages might need to be for a trader who deals in only one kind of highly structured, long - term instrument, as compared to the arrangements for the firm ’ s chief executive officers. supervisory initiatives in issuing the proposed guidance, the federal reserve also announced two separate supervisory initiatives to ensure that the principles are incorporated by banking organizations in their compensation arrangements. these initiatives are also intended to help identify and promote emerging best practices in the industry. like the principles themselves, the separate supervisory programs recognize the differences among the many banking organizations we supervise. the first initiative applies to the institutions we classify for general supervisory purposes as large, complex banking organizations ( lcbos ). lcbos warrant special supervisory attention because they are significant users of incentive compensation arrangements and because flawed practices at these institutions are more likely to have adverse effects on the broader financial system. the challenge with respect to these institutions was that while we did not want to impose inflexible, and possibly ineffective, practices across the wide range of compensation arrangements, we also did not want there to be insufficient attention paid to the very particulars that led us to adopt this approach in the first place. accordingly, we decided to place the burden on each of these lcbos to develop a plan that would, with appropriate specificity, implement the principles we have identified into the firm ’ s compensation policies and practices. a rigorous process of planning and implementation, with accompanying supervisory oversight, makes it possible for these firms to customize their compensation arrangements. our supervisory approach to compensation practices at lcbos will include an extensive horizontal review process, in keeping with our increased emphasis on this approach for the supervision of the largest institutions. this horizontal review, which we expect to commence shortly, will be led by a multidisciplinary coordinating group of federal reserve staff. we anticipate that it will include staff from the board, from reserve banks that supervise lcbos, and from other financial regulators. this group also will serve as a resource for supervisory staff across the federal reserve system on incentive compensation matters. this review process will enhance our understanding of existing incentive compensation practices, identify existing or emerging best practices across the organizations, and provide an informed framework for evaluating firms ’ plans for improving their practices. in this regard, each lcbo will be expected to develop and present to the federal reserve a plan that identifies where improvements to the organization ’ s compensation arrangements and related practices are needed to bring them in line

, by themselves, are unlikely to induce substantial further investment, for example, in the long - haul fiber network. however, it would be a mistake to focus on only one channel of monetary influence, such as the impact that policy might have on the demand for high - tech equipment. monetary policy works on a wide variety of spending, including housing, consumption expenditures, and net exports, and the channels through which policy works range broadly across the financial markets. just as in the past, an easing of policy is likely, over time, to provide impetus to growth of demand in the aggregate, even if it does not immediately lift the prospects of the hardpressed firms in some high - tech industries. nonetheless, despite our aggressive easing actions of the first half of this year, i believe that it is too early to say definitively that the current period of subpar growth has ended. given the likely magnitude of the capital goods adjustment that i have just discussed, as well as other forces, i expect only a gradual pick - up in the rate of growth later this year. against that background, i continue to believe that the balance of risks seems to be toward continuing weakness in the economy. conclusion in sum, although it is difficult to determine how large the overhangs of capital might be at present, they seem likely to exert at least a modest amount of drag on the economy over the near term, even as growth picks up. over time, though, the discrepancy between actual and desired stocks of capital will be worked off, both as actual holdings diminish through depreciation, and as target holdings increase with the revival of aggregate demand. the overhang does not require that we alter our basic approach to monetary policy : we still maintain the ultimate objectives of price stability and maximum sustainable employment. mainly, the overhang factors into our thinking through the risk it might pose to the intermediate - term outlook for economic activity and employment. over the long term, the current problems almost surely will be resolved in the ways that markets have solved past problems of capital misallocation : investments that no longer seem likely to earn the profits that had been expected will be written off, at the same time that capital is being reallocated toward emerging opportunities. overall, i remain cautiously optimistic about the long - run prospects for investment in new technologies, and for the beneficial implications that will have for the u. s. and world economies.