poor man get a good job if he has not benefited from good healthcare and education in the first place? in this modern world where good skills are critical to a good job, the unskilled have little recourse but to take a poorly - paying job or to look for the patronage that will get them a good job. so do we not arrive at a contradiction : the good delivery of public services is essential to escape the dependence on bad public services? money liberates and empowers... we need to go back to the drawing board. there is a way out of this contradiction, developing the idea that money liberates. could we not give poor households cash instead of promising them public services? a poor household with cash can patronize whomsoever it wants, and not just the monopolistic government provider. because the poor can pay for their medicines or their food, they will command respect from the private provider. not only will a corrupt fair price shop owner not be able to divert the grain he gets since he has to sell at market price, but because he has to compete with the shop across the street, he cannot afford to be surly or lazy. the government can add to the effects of empowering the poor by instilling a genuine cost to being uncompetitive – by shutting down parts of the public delivery systems that do not generate enough custom. much of what we need to do is already possible. the government intends to announce a scheme for full financial inclusion on independence day. it includes identifying the poor, creating unique biometric identifiers for them, opening linked bank accounts, and making government transfers into those accounts. when fully rolled out, i believe it will give the poor the choice and respect as well as the services they had to beg for in the past. it can break a link between poor public service, patronage, and corruption that is growing more worrisome over time. undoubtedly, cash transfers will not resolve every problem, nor are they uncontroversial. a constant refrain from paternalistic social workers is that the poor will simply drink away any transfers. in fact, studies by ngos like sewa indicate this is not true. moreover, one could experiment with sending transfers to women, who may be better spenders. some argue that attaching conditions to cash transfers – for example, they will be made provided the bis central bankers ’ speeches recipient ’ s children attend school regularly – may improve the usage of the

##hievable under the current framework for clearing and settlement. of course, like other central banks, the federal reserve continues to monitor systemically important payment and settlement systems and to compare their performance with international standards for reliability, efficiency, and safety. unlike most other central banks, however, the federal reserve does not have general statutory authority to oversee these systems. instead, we rely on a patchwork of authorities, largely derived from our role as a banking supervisor, as well as on moral suasion, to help ensure that the various payment and settlement systems have the necessary procedures and controls in place to manage the risks they face. as part of any larger reform, the congress should consider granting the federal reserve explicit oversight authority for systemically important payment and settlement systems. yet another key component of the software of the financial infrastructure is the set of rules and procedures used to resolve claims on a market participant that has defaulted on its obligations. in the overwhelming majority of cases, the bankruptcy laws and contractual agreements serve this function well. however, in the rare circumstances in which the impending or actual failure of an institution imposes substantial systemic risks, the standard procedures for resolving institutions may be inadequate. in the bear stearns case, the government's response was severely complicated by the lack of a clear statutory framework for dealing with such a situation. as i have suggested on other occasions, the congress may wish to consider whether such a framework should be set up for a defined set of nonbank institutions. a possible approach would be to give an agency – the treasury seems an appropriate choice – the responsibility and the resources, under carefully specified conditions and in consultation with the appropriate supervisors, to intervene in cases in which an impending default by a major nonbank financial institution is judged to carry significant systemic risks. the implementation of such a resolution scheme does raise a number of complex issues, however, and further study will be needed to develop specific, workable proposals. a stronger infrastructure would help to reduce systemic risk. importantly, as my fomc colleague gary stern has pointed out, it would also mitigate moral hazard and the problem of " too big to fail " by reducing the range of circumstances in which systemic stability concerns might be expected by markets to prompt government intervention. a statutory resolution regime for nonbanks, besides reducing uncertainty, would also limit moral hazard by allowing the government to resolve failing firms in a way that is orderly but also wipes out equity holders and haircuts some creditors, analogous to what happens when