the federal reserve and changed the composition of the types of assets it holds. market monitoring and the knowledge of market functioning has been crucial for the effective translation of broad policy directives for these purchase programs into concrete operational plans. in the case of agency mortgage - backed securities ( mbs ) purchases, initially the federal reserve used external investment managers, acting at the direction of the desk, as a means of implementing mbs purchases. this was necessary because the desk had not transacted in mbs prior to the crisis and thus did not have either the systems or the market knowledge needed to execute purchases efficiently. as the markets group staff developed the operational capacity and analytical expertise, partly by working closely with the investment managers, it began to execute mbs purchases and assumed full trading responsibility in march 2010. prior to assuming their trading role, staff gained an in - depth understanding of the fundamental aspects of the mbs market and technical trading conventions. this expertise allowed the staff to effectively synthesize numerous market indicators and apply them to its trading. for example, understanding supply and demand factors affecting the mbs market is essential in helping to ensure that operations can be executed smoothly. in addition, mbs have an embedded prepayment option, which affects the risk and prepayment characteristics of these securities, and consequently the way in which purchases of these securities influence policy objectives and the federal reserve ’ s balance sheet over time. the scope of the desk ’ s market expertise has had to expand in ways beyond supporting new modes of operation. as the financial crisis revealed the importance of maintaining a wide range of financial market knowledge, desk staff covered a broader set of financial markets and instruments compared to the pre - crisis period. we also more explicitly focused on linkages between markets and underlying, longer - term trends that could present financial stability risks in the future. with the expansion of monetary policy into less conventional territory, our analysis of monetary policy expectations had to evolve as well, as evidenced by an increasingly comprehensive survey of primary dealer economists each fomc cycle4. lastly, our own internal analytical capabilities have also deepened, for instance with the creation of a portfolio analytics unit to better assess the risks and outlook associated with the federal reserve ’ s expanded asset holdings. 5 i anticipate that as the economic and policy environment changes, the desk ’ s interactions with the market will continue to evolve, both in terms of its operational capabilities and the focus of its market monitoring and analytical responsibilities needed to support federal reserve operations and the

economy.... to restore trust, we need a shift toward greater integrity and accountability. we need a stronger and systematic ethical dimension. ” ) ; mark carney, rebuilding trust in global banking, speech at 7th annual thomas d ’ aquino lecture on leadership, ontario, february 25, 2013, ( “ the real economy relies on the financial system. and the financial system depends on trust. indeed, trust is imbedded in the language of finance. the word credit is derived from the latin, credere, which means ‘ to have trust in. ’ ” ) ; dudley, supra n. 1 ( “ unless the financial i see generally onora o ’ neill, a question of trust 15 – 17, 23 – 24, and 43 – 47 ( 2002 ) ( distinguishing trust from trustworthiness ). ndustry can rebuild the public trust, it cannot effectively perform its essential functions. for this reason alone, the industry must do much better. ” ). see generally onora o ’ neill, a question of trust 15 – 17, 23 – 24, and 43 – 47 ( 2002 ) ( distinguishing trust from trustworthiness ). bis central bankers ’ speeches untrustworthy or disloyal, will they choose to work in that firm? and, if they do, how will they behave toward the firm and its stakeholders? i am encouraged that the industry seems to understand the importance of reforming its culture. consider for a moment the following data points. in september 2013, shareholders of a major u. s. bank requested that the bank prepare “ a full report on what the bank has done to end [ its ] unethical activities, to rebuild [ its ] credibility and provide new strong, effective checks and balances within the [ b ] ank. ” that request was forwarded, by the way, by a catholic nun. the bank responded through its attorneys that the nun ’ s proposal was “ materially false and misleading ” and “ impermissibly vague and indefinite. ” 9 fast forward to may 2015. the federal advisory council - a panel of bankers that advises the federal reserve system - reported that “ regulators and the banking industry have worked extensively to restore financial stability through a series of mechanisms and rules that establish appropriate levels of capital, liquidity, and leverage.... as often as not, however, the challenges faced in recent years have been behavioral and cultural ; post - crisis episodes such as libor and foreign