elizabeth a duke : opening remarks at the public hearing on potential revisions to the home mortgage disclosure act opening remarks by ms elizabeth a duke, member of the board of governors of the federal reserve system, at the public hearing on potential revisions to the home mortgage disclosure act, washington dc, 24 september 2010. * * * good morning. on behalf of the board of governors of the federal reserve system, i ’ d like to welcome everyone to the last of our series of public hearings held to discuss changes to the home mortgage disclosure act ( hmda ). the knowledge and feedback we have gained from these hearings will help us to assess the adequacy of current mortgage data, examine the need for additional data, and explore possible changes to regulation c, which implements hmda. i ’ d like to thank our colleagues at the federal reserve banks of atlanta, san francisco, and chicago for hosting the first three hearings. our series of hearings kicked off just as congress passed regulatory reform legislation earlier this summer. the dodd - frank act provides for some changes to hmda data collection and submission, and we look forward to hearing from our panelists and members of the public about the implementation of these changes. the new law also transfers authority for hmda rulemaking from the board of governors to the new consumer financial protection bureau ( cfpb ). all information gleaned from these hearings will inform our own work for the time that we continue to have rulewriting authority. when that authority transfers to the cfpb, be assured that we will hand over the most current thinking about changes to regulation c. over the course of these hearings, we have heard from key players in the home mortgage market : lenders and other market participants, academics and researchers, consumer advocacy and community development organizations, data experts, regulators, and other public officials. although they play different roles, we believe that all share a common goal : to ensure that the mortgage market is responsible, transparent, efficient, and serves the needs of consumers and market participants alike. clearly, the recent mortgage crisis has highlighted the potential ramifications of a mortgage market that is not functioning well. hmda data do not create the market or solve all market problems, but they do help us understand what is happening in the market. the time is certainly ripe for reviewing and revising the data elements, standards, and reporting formats. hmda has three purposes. one is to provide the public and government officials with data that will help show whether lenders

to be justified. they reflect diverging fundamentals in different countries – ie the different economic situation and levels of public debt. it is questionable whether the convergence of yields in the years before the crisis reflected the right assessment of the various risks underlying these investments. currently, refinancing conditions for the peripheral countries have improved notably. hence, omt will hopefully never have to be activated. however, market sentiment can change very quickly. in january 2010, greece received offers of about eur 25 billion for its five - year government bond issue with a volume of eur 8 billion. a couple of weeks later, greece was no longer able to refinance its liabilities via the capital market. although there are currently small improvements in gdp growth in several european countries, the risk of renewed tensions in sovereign debt markets is still alive given low growth and the slow implementation of reforms on the one hand and the expected tapering of the fed ’ s quantitative easing programme on the other hand. lower investor confidence, besides sending european government bond yields and cds premia higher in the secondary markets, has also impacted the primary markets. the space left by external creditors was occupied by domestic investors such as banks, who increased their investments particularly following the introduction of the three - year ltros. the trend towards renationalisation is a development that needs to be monitored. it reinforces the interdependence of the sovereign sector and the domestic banking system. european banks often only invest in the sovereign bonds of their home countries. credit institutions must increase their risk awareness in terms of sovereign bonds. on the one hand, banks should have credit limits for individual countries. this would reduce dependencies on certain debtors. on the other hand, these bonds have to be secured by a sufficient level of equity. in the medium term, government bonds should be treated like corporate bonds. experience has taught us that sovereign bonds are not a risk - free asset. furthermore, risk - appropriate treatment would lead to increasing yields of countries with unsound finances. therefore, market regulation would provide an incentive for fiscal discipline. the current initiative to establish an effective single supervisory mechanism is a step in the right direction. it will help us to identify risks at an earlier stage and is therefore also important for disentangling the critical link between sovereign and bank funding. however, the banking union, consisting of a sound single supervisory mechanism and single resolution mechanism, is a future project to prevent future problems. existing burdens have to be