was potentially unstable. it was clear that the market needed to develop alternatives in case the worst happened, and this was the reason that we convened the arrc four years ago. we asked the arrc to identify a robust alternative to u. s. dollar libor and to develop a plan to promote its use. sandie o ’ connor will speak shortly about the arrc ’ s work, but i want to emphasize that this has been a model of cooperative effort between the private sector and the public sector. when the arrc started, the interest rate benchmarks that they would eventually narrow their choice down to did not even exist. those rates have not been easy to create, and as the arrc expressed interest in a treasury repo rate benchmark that would span the widest possible scope of the market, the federal reserve bank of new york put great effort in working with the federal reserve board and office of financial research to create sofr. the result, the rate the arrc has chosen, reflects the largest and deepest rates market in the world and is a huge accomplishment for all of us. that accomplishment is only the start of what will be many. as i noted, just three months after sofr has begun production, we have already seen the introduction of futures markets on the chicago mercantile exchange. lch has now begun to offer clearing of sofr overnight index and basis swaps, and cme group will begin to do so within a few months. these are steps that the private sector must lead, and they have, but it is important that the public sector encourage the development of sofr markets where it can. the arrc has issued a first letter to u. s. regulators asking us to consider exemptions for legacy swaps seeking to incorporate the international swaps and derivatives association ’ s protocol or exemptions for amending to move from libor to sofr, and these are issues that we should look at seriously ; we should avoid placing unintended hurdles in the way of those who may seek to transition from libor. here is something you don ’ t hear often in the context of any large, complex undertaking involving input from a large number of stakeholders : the effort to implement sofr is ahead of schedule. the arrc has recognized that we have to make transitioning to sofr as easy as it can be. that is the reason that it has added the creation of a forward - looking term rate as the final step in its paced transition plan. as

credit, and economic recovery and restoration of growth depend on confidence being reestablished, so that the necessary financing, beyond emergency lending, can be obtained. secondly, we in the public sector would be well served to maximize the complementarity between efforts to prevent crises and efforts to contain and resolve crises when they do arise. § the consensus on sound preventative policies includes precepts that public sectors should limit the scale of their involvement in the domestic economy, and that borrowers, public and private, should be encouraged to follow best practices in the management of their liquidity, foreign exchange, and credit risk. indeed, as i discussed earlier, this is the essence of what we are trying to do under the revised capital accord. moreover, countries are being encouraged to strengthen their legal and regulatory regimes for insolvency resolution to deal more effectively with cases when private sector borrowers and lenders get it wrong. § progress in these areas, even if only incremental, will have important implications for what is possible and necessary in the future. for example, having stronger bank and corporate balance sheets, with lower leverage, expands the scope for using interest rates and asset price adjustments as stabilizing devices. better liquidity management at both the micro and macro levels - - longer maturities, and greater reserve coverage and back - up financing - - will create margins to ride out financial shocks. and more effective insolvency regimes would make decentralized workouts more feasible, particularly in cases where systemic stress is better contained. • the approach to crisis management and resolution also needs to be creative. in part, this can be accomplished by relying as much as possible on the efforts of debtors and private creditors to work things out on their own. the perception in some circles that private creditors are not interested in resolving payment problems expeditiously is mistaken, and stands at odds with recent experience. if nothing else, investors are interested in restoring liquidity to debt instruments in order to move on to new opportunities. there is also scope for exploring creative market - based ways to lever in private participation and stretch the impact of public sector funds. g • the various experiences since the late 80s with buybacks, partial guarantees, and debt exchanges provide some hints for how targeted deployment of public moneys can spur tendencies in a direction consistent with public policy goals. such creativity is essential if we are to get beyond stark and unpalatable choices entailing either massive bailouts or sweeping defaults. finally