philip n jefferson : opening remarks - 18th central bank conference opening remarks by mr philip n jefferson, member of the board of governors of the federal reserve system, at the 18th central bank conference on the microstructure of financial markets, board of governors of the federal reserve system, washington dc, 19 october 2023. * * * it is my pleasure to welcome you to the 18th central bank conference on the microstructure of financial markets. this is the first time that this event has been held at the federal reserve board, and we are very pleased to host the conference. before i begin, let me remind you that the views i will express today are my own and are not necessarily those of my colleagues in the federal reserve system. our guests include academics from a number of institutions, both in the u. s. and abroad ; fellow central bankers, including colleagues from the bank of england, the bank of japan, and the bank for international settlements ; and friends from across the federal reserve system and from several u. s. government agencies, such as the commodity futures trading commission ( cftc ), the securities and exchange commission ( sec ), and the u. s. treasury, including the office of financial research ( ofr ). now, since this is what you have gathered here to discuss, i do not have to convince this group of the critical importance of well - functioning financial markets for the economy. in my case, coming as a macroeconomist from the academic world to the federal reserve has only reinforced that conviction. market microstructure is important central bankers, regulators, and market participants ask a lot of financial markets. we want financial markets to be effective and efficient, and to aggregate and reflect all pertinent information. we rely on these markets to help us gauge how the economy is performing, to help us measure market expectations of monetary policy, and even to help us predict how the economy might evolve in the future. we want financial markets to be deep and liquid in good times, but also to remain deep and resilient when the economy is stressed. we want financial markets to be fair, so as not to favor certain participants. and central bankers, obviously, rely critically on financial markets for the implementation and transmission of monetary policy. as we have broadened our arsenal of policy tools over the past two decades and as markets have become larger, more complex, and more diverse, i would argue that it has become even more critical for us to

are unlikely to want to hold onto a property whose value has depreciated significantly, and some borrowers – perhaps because they were put into an inappropriate loan or because personal circumstances have changed – cannot realistically sustain homeownership. however, if a foreclosure is preventable, and the borrower wants to stay in the home, the economic case for trying to avoid foreclosure is strong. because foreclosures impose high costs, including legal and administrative costs as well as the costs of leaving the property vacant for a possibly extended period, both the borrower and the lender often are better off avoiding foreclosure. moreover, it is important to recognize that the costs of foreclosure may extend well beyond those borne directly by the borrower and the lender. clusters of foreclosures can destabilize communities, reduce the property values of nearby homes, and lower municipal tax revenues. at both the local and national levels, foreclosures add to the stock of homes for sale, increasing downward pressure on home prices in general. in the current environment, more - rapid declines in house prices may have an adverse impact on the broader economy and, through their effects on the valuation of mortgage - related assets, on the stability of the based on servicer data from first american loanperformance. financial system. thus, finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy. to determine the appropriate public - and private - sector responses to the rise in mortgage delinquencies and foreclosures, we need to better understand the sources of this phenomenon. in good times and bad, a mortgage default can be triggered by a life event, such as the loss of a job, serious illness or injury, or divorce. however, another factor is now playing an increasing role in many markets : declines in home values, which reduce homeowners'equity and may consequently affect their ability or incentive to make the financial sacrifices necessary to stay in their homes. on the principle that a picture is worth a thousand words, federal reserve staff, using detailed, county - by - county information on mortgage performance, have developed a series of " heat maps, " which summarize the incidence of serious mortgage delinquencies across the nation as well as some of the key drivers of loan performance. as the examples will make clear, the figures use warmer colors – orange and red – to