and they will continue to promote recovery over time. unfortunately, the recession, besides being extraordinarily severe as well as global in scope, was also unusual in being associated with both a very deep slump in the housing bis central bankers ’ speeches market and a historic financial crisis. these two features of the downturn, individually and in combination, have acted to slow the natural recovery process. notably, the housing sector has been a significant driver of recovery from most recessions in the united states since world war ii, but this time – with an overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and ongoing concerns by both potential borrowers and lenders about continued house price declines – the rate of new home construction has remained at less than one - third of its pre - crisis level. the low level of construction has implications not only for builders but for providers of a wide range of goods and services related to housing and homebuilding. moreover, even as tight credit for some borrowers has been one of the factors restraining housing recovery, the weakness of the housing sector has in turn had adverse effects on financial markets and on the flow of credit. for example, the sharp declines in house prices in some areas have left many homeowners “ underwater ” on their mortgages, creating financial hardship for households and, through their effects on rates of mortgage delinquency and default, stress for financial institutions as well. financial pressures on financial institutions and households have contributed, in turn, to greater caution in the extension of credit and to slower growth in consumer spending. i have already noted the central role of the financial crisis of 2008 and 2009 in sparking the recession. as i also noted, a great deal has been done and is being done to address the causes and effects of the crisis, including a substantial program of financial reform, and conditions in the u. s. banking system and financial markets have improved significantly overall. nevertheless, financial stress has been and continues to be a significant drag on the recovery, both here and abroad. bouts of sharp volatility and risk aversion in markets have recently re - emerged in reaction to concerns about both european sovereign debts and developments related to the u. s. fiscal situation, including the recent downgrade of the u. s. long - term credit rating by one of the major rating agencies and the controversy concerning the raising of the u. s. federal debt ceiling. it is difficult to judge

the swap arrangement to the federal reserve ) at the exact same exchange rate that applied to the original transaction, they are conducted with major central banks with track records of prudent decisionmaking, and they are secured by the foreign currency provided by those central banks. 1f the success of these swap lines in alleviating funding pressures and reducing interbank borrowing rates is a testament to the benefits of central bank cooperation. moreover, in addition to easing funding shortages, these swaps also helped to allay market fears – they had a preventive as well as a curative role. for example, four of the central banks that participated in these arrangements – brazil, canada, new zealand, and singapore – did not end up drawing on the facilities, but it is generally believed that the existence of the lines helped prevent stresses that could have otherwise developed. as the financial crisis receded, the swap lines were closed in february 2010. however, swap lines with several foreign central banks were reopened in response to financial strains that developed in europe. 3 2f in many countries, policy rates fell to nearly zero. with substantial economic slack remaining, these central banks faced the challenge of finding ways to further ease monetary policy. the federal reserve expanded its balance sheet through the purchase of longer - term treasury securities, agency debt, and agency mortgage - backed securities. the idea was to put downward pressure on longer - term yields to spur demand and also to encourage some portfolio rebalancing toward riskier assets and loans to the private sector. more recently, the federal open market committee decided to extend the average maturity of its holdings of securities by selling shorter - maturity treasury securities and buying longer - maturity treasury securities. this maturity extension program created additional downward pressure on long - term rates without expanding the size of the federal reserve ’ s balance sheet. in addition to using conventional monetary policy and balance sheet tools to provide monetary accommodation, communication is an important tool used by central banks to the 14 central banks were those in australia, brazil, canada, denmark, the euro area, south korea, japan, new zealand, mexico, norway, singapore, sweden, switzerland, and the united kingdom. these swap lines have been renewed several times since then, with the current authorization running through february 2013. bis central bankers ’ speeches enhance the effectiveness of policy. at the conclusion of each meeting, the federal open market committee issues a statement of policy actions taken and the rationale for those actions. detailed minutes are published three weeks later, and lightly