). conclusion independence in the conduct of monetary policy is at the core of advanced modern economies. and it can be too easily forgotten by those who have only known its benefits. if the federal reserve lost its independence, its hard - earned credibility would quickly dissipate. the costs to the economy would be incalculable : higher inflation, lower standards of living, and a currency that risks losing its reserve status. now more than ever, market participants are watching the relationship between central banks and their governments. they are keenly gauging whether changes in conditions, policies, or practices pierce the veil of central bank independence. central bankers the world over must demonstrate that we are worthy of this moment, and will be steadfast protectors of our institutions ’ credibility. that means respecting our important but circumscribed role in the conduct of policy, and performing our mission with competence and consistency.

alan greenspan : stock options and related matters remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the 2002 financial markets conference of the federal reserve bank of atlanta, sea island, georgia ( via satellite ), 3 may 2002. * * * i asked jack guynn and bob eisenbeis what issues you would like me to address this morning. they suggested that events associated with the failure of enron have refocused attention on a number of accounting issues. in an economy as large, diverse, and complex as ours, sound corporate governance - - including the accurate measurement of corporate performance - - is essential if our nation's resources are to be directed to their most efficient uses. there can be little doubt that, on the whole, both, as employed in the united states in recent decades, have been of very high quality. we simply could not have achieved our level of economic performance if capital were allocated on the basis of grossly inaccurate information. but the very complexity and dynamism of our system requires that we constantly evaluate the tools employed for measuring corporate performance to ensure that they adapt appropriately to the evolving financial and economic environment. in that regard, the increasing use of stock option grants to employees has raised new challenges for our accounting system. such options are important to the venture capital industry, and many in high - tech industries have counselled against making any changes to current practices. they argue that the use of options is an exceptionally valuable compensation mechanism ; that recognizing an expense associated with these grants would reduce the use of options, harming high - tech companies ; that the effect of options on fully diluted earnings per share is already recognized ; and that we cannot measure the costs of options with sufficient accuracy to justify their recognition on financial statements. these are important concerns. this morning, i would like to address them and other related issues. the seemingly narrow accounting matter of option expensing is, in fact, critically important for the accurate representation of corporate performance. and accurate accounting, in turn, is central to the functioning of free - market capitalism - - the system that has brought such a high level of prosperity to our country. capitalism expands wealth primarily through creative destruction - - the process by which the cash flow from obsolescent, low - return capital is invested in high - return, cutting - edge technologies. but for that process to function, markets need reliable data to gauge the return on assets. measures of profitability