william c dudley : remarks at the regional employment press briefing remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the 2010 regional employment press briefing, new york, 14 april 2010. * * * good morning and welcome to the new york fed ’ s 2010 regional employment press briefing. the past few years have been an extraordinary time for policymakers. we have been very aggressive in providing support to the economy and it now appears that we are emerging from a deep and protracted recession. economic activity expanded over the second half of 2009, suggesting that a recovery has begun. while we continue to receive encouraging news, growth is likely to be muted compared with the early stages of past recoveries. as a result, the unemployment rate is likely to decline over the near term at a very gradual pace, if at all. in the labor market, employment has begun to expand. we hope this is the beginning of a sustained period of job growth. total employment shrank by roughly 8 million jobs since the peak of the cycle, and the current unemployment rate of 9. 7 percent remains unacceptably high. at the regional level, here in the new york - new jersey region, the labor market was not hit as hard as in many areas in the country, and the pace of job losses in our region has eased. nevertheless, the unemployment rate in new york and new jersey has risen to levels not seen in almost two decades. in new york city, employment has typically recovered more than a year later than the recovery of national employment and has, in the past, been led by a recovery of wall street employment. although upstate new york has seen little overall job growth for the past several decades, job losses in this downturn were not as severe as losses for the nation, in part, because the upstate metro areas did not experience a boom - and - bust housing cycle. in addition, puerto rico, which is also part of our district, has experienced a considerably longer and deeper downturn than the mainland or this region. before i continue, it is important to explain the integral role of the federal reserve system in regional economies across the country. one of our key responsibilities here at the federal reserve bank of new york is to connect the federal reserve system to main street across our district. real activity takes place on main street in the form of the millions of decisions made every day by households and businesses around the country. when we talk to them, we

increases market liquidity. robust reference rates can also reduce information asymmetries and the risk of misconduct by providing transparent, independent pricing. but, in the case of libor, the foundation had serious flaws. most notably, libor was ( and is ) based on submissions from individual banks — which, in turn, were based on hypothetical borrowing rates or expert judgments, and not actual transactions. moreover, deficiencies existed in regulatory oversight and governance of the rate - setting mechanism. these vulnerabilities enabled the manipulation of the rate for the financial benefit of individuals and institutions. amid profound breakdowns in controls and compliance, individual traders conspired with rate submitters at their own institutions or traders at other firms to manipulate the setting of the rate to improve their trading results. during the global financial crisis, panel banks also reportedly submitted lower borrowing rates than they could actually obtain in the marketplace. they did so to disguise their financial fragility at a time when uncertainty over bank liquidity and solvency was high. 3 the resulting scandal was particularly disturbing because of its scale and flagrancy, including collusion by employees across firms. it led to billions of dollars in fines, jail terms for some individuals, and severe reputational damage to the financial industry as a whole. the global 1 / 6 bis central bankers'speeches financial crisis exposed excessive risk - taking and a long series of lapses in judgment, and the libor scandal further undermined trust in the ethical standards of the banking industry. the scandal provides many cautionary lessons, including the ways in which poor technical design can be exploited, the limitations of self - regulation, the problems that arise when loyalty is to one ’ s trading co - conspirators rather than to one ’ s institution, and the need for robust controls. it also underscores the power of incentives to drive individuals and firms to do things that are imprudent and / or unethical. 4 and, the governance and control framework that the banks and the libor administrator had in place proved woefully insufficient to prevent misconduct that stemmed from poor incentives. in this context, one could say it was a situation ripe for exploitation. the openness and brazenness of misconduct as captured in the recorded transcripts also point to serious deficiencies in bank culture. my new york fed colleagues and i have commented frequently on the need for sound culture and incentives as a complement to effective regulation and supervision. while there has been some progress on