caused equity prices to fall sharply, the cost of short - term credit – where available – to spike upward, and liquidity to dry up in many markets. losses at a large money market mutual fund sparked extensive withdrawals from a number of such funds. a marked increase in the demand for safe assets – a flight to quality – sent the yield on treasury bills down to a few hundredths of a percent. by further reducing asset values and potentially restricting the flow of credit to households and businesses, these developments pose a direct threat to economic growth. the federal reserve took a number of actions to increase liquidity and stabilize markets. notably, to address dollar funding pressures worldwide, we announced a significant expansion of reciprocal currency arrangements with foreign central banks, including an approximate doubling of the existing swap lines with the european central bank and the swiss national bank and the authorization of new swap facilities with the bank of japan, the bank of england, and the bank of canada. we will continue to work closely with colleagues at other central banks to address ongoing liquidity pressures. the federal reserve also announced initiatives to assist money market mutual funds facing heavy redemptions and to increase liquidity in short - term credit markets. despite the efforts of the federal reserve, the treasury, and other agencies, global financial markets remain under extraordinary stress. action by the congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy. in this regard, the federal reserve supports the treasury's proposal to buy illiquid assets from financial institutions. purchasing impaired assets will create liquidity and promote price discovery in the markets for these assets, while reducing investor uncertainty about the current value and prospects of financial institutions. more generally, removing these assets from institutions ’ balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth. at this juncture, in light of the fast - moving developments in financial markets, it is essential to deal with the crisis at hand. certainly, the shortcomings and weaknesses of our financial markets and regulatory system must be addressed if we are to avoid a repetition of what has transpired in our financial markets over the past year. however, the development of a comprehensive proposal for reform would require careful and extensive analysis that would be difficult to compress into a short legislative timeframe now available. looking forward, the federal reserve is committed to working closely with the congress, the administration

##sparities are identified, however, national supervisors of outlier banks should be called upon to explain the results to their fellow supervisors, as well as steps they are taking to address situations in which differences may arise from systematic underestimation of risk or manipulation of capital ratios to achieve desired outcomes. any of these options would require the basel committee, international supervisors, and banking organizations to work together to address confidentiality concerns, as well as other jurisdictional issues. some options will surely prove more feasible than others. while we do not prejudge which will prove to be most effective, we do maintain that something of this sort is necessary in order to assure that the benefits for financial stability promised by see, for example, nout wellink ( 2011 ), “ basel iii : a roadmap to better banking regulation and supervision, ” remarks delivered at the fsi high - level meeting on the new framework to strengthen financial stability and regulatory priorities, st. petersburg, russia, may ; and stefan walter ( 2011 ), “ basel iii : stronger banks and a more resilient financial system, ” remarks delivered at the financial stability institute conference on basel iii, basel, april. bis central bankers ’ speeches international capital standards are in fact being realized, as well as to prevent some banks from enjoying competitive advantage through lax application of these standards. at the same time, any of these options will give banking supervisors from the countries represented on the basel committee an opportunity to work together to address the many issues of implementation, interpretation, and evasion that will surely arise under basel iii. thank you for your attention. i would be pleased to answer any questions you might have. bis central bankers ’ speeches