randall s kroszner : markets, financial institutions, and consumers a€ “ the roles of the federal reserve speech by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the national bankers association 80th annual convention, durham, north carolina, 11 october 2007. * * * it is a pleasure to take part in this event. i commend our hosts for bringing together such a broad range of participants and for developing an agenda that addresses issues of great significance to the banking community. my goal today is to offer a broad perspective of the federal reserve's various responsibilities and complementary roles. the roles of the federal reserve may seem somewhat obscure and, to many, even disconnected. i would venture a guess that as bankers, you think first of examiners when you hear " federal reserve " - - and perhaps do so with a groan. but as you know, bank supervision is only one of the federal reserve's functions. in my remarks today, i will speak about some of the federal reserve's responsibilities and discuss how they relate to markets, financial institutions, and consumers. the central bank and monetary policy as the nation's central bank, the federal reserve has the unique power in the u. s. financial system to create money, giving it the ability to conduct monetary policy for the u. s. economy. that power also enables the federal reserve to provide liquidity - - a capability that is particularly important when the financial system is under stress. indeed, the federal reserve was established in 1913 as a means of addressing the periodic financial panics and accompanying economic downturns that had afflicted the nation at various times. the congress has given the federal reserve specific objectives for the conduct of monetary policy - - in particular, to conduct monetary policy in a way that promotes the long - run objectives of maximum sustainable employment and stable prices. monetary policy is implemented primarily through open market operations - - that is, the purchase and sale of securities in the open market - - which gives the federal reserve the ability to control shortterm interest rates. the federal open market committee ( fomc ) oversees the conduct of open market operations and formulates monetary policy by setting an operating target for the federal funds rate that is judged to be consistent with fostering the federal reserve's longrun objectives. as part and parcel of its pursuit of maximum sustainable employment and stable prices, the federal reserve has a broad responsibility to foster financial

and we are in the process of launching an important study on the effects of reforms aimed at ending too big to fail. this evaluation is being led by claudia buch, vice president of the deutsche bundesbank. conclusion this is an important time for the fsb. we are nearing completion of the post - crisis reform agenda, a major accomplishment. with that comes the opportunity to turn our focus to ways in which we can improve the fsb and prepare it for the next phase of its existence. we will work diligently to enhance our transparency and to expand our efforts to reach out to as many stakeholders as possible. we will prepare for the next crisis by making sure that our framework to assess vulnerabilities to financial stability is state of the art and remains so going forward. and, we will work hard to maintain the important reforms in place, ensure they are working as intended, and, where possible, improve them. 4 / 4 bis central bankers'speeches