addition to celebrating financial literacy month 2007, we are here today to celebrate the inaugural event of the greater washington, d. c., chapter of the jump $ tart coalition for personal finance. the coalition is a national leader among organizations that work to improve the personal financial literacy of students from kindergarten to the university level. in particular, through its biennial survey of high school seniors, jump $ tart has brought increased attention to the issue of financial literacy among youth in the united states. the results of the surveys, which have shown that students'financial knowledge is often much less extensive than we would like, remind us of the need for continued efforts to help all students – as well as adults – obtain the skills they need to navigate today's increasingly complex financial markets. this new chapter of jump $ tart has joined forces with over fifty individuals, businesses, and not - for - profit, educational, and government organizations, including the federal reserve board, to increase knowledge about personal finance among schoolchildren and young adults in the greater washington, d. c., region. the federal reserve is strongly committed to jump $ tart's mission and to working closely with the local washington, d. c., chapter – as it does with the other jump $ tart chapters around the country through its reserve banks and branches – to help achieve this mission. finally, i would like to take this opportunity to express my appreciation of the teachers and staff of wilson senior high and the administrators of the washington, d. c., public school district here today. it is your hard work and dedication to these students that will help guide them toward successful futures. there is no higher nor more worthy objective than preparing our young people for fulfilling and productive lives. to the students of wilson senior high, i wish you the best of luck in the future, and i especially want to congratulate the seniors who will be graduating at the end of this term. lastly, a special thanks to the greater washington, d. c., chapter of the jump $ tart coalition and their partners for their continued support and commitment to furthering the financial education of our youth. thank you.

did not directly compete with one another. government regulation mirrored and reinforced this segmentation. with financial innovation came new levels of competition, which then caused pressure for government to change the rules of play. as a result, the legal strictures preventing banks from engaging in certain businesses are being loosened. banks are increasingly in direct competition with securities firms and insurance companies. new technology and financial innovation have clearly affected the way in which many firms manage their business. they have also put stress on many aspects of traditional legal, regulatory, and accounting frameworks. over the past decade bank supervisors have learned some important lessons in this regard. these lessons propel our efforts to adapt supervisory and regulatory regimes to better accommodate the changes under way in the financial services sector - - to move to a new supervisory paradigm. today, i would like to briefly summarize some of these lessons, illustrate how they are shaping the evolution of bank supervision, and some thoughts of how they may affect international supervision, as well. lessons learned by bank supervisors perhaps the most basic lesson we have learned from our experience in supervising trading and derivatives activities is that the underlying risk of a financial instrument is more important than what an instrument is called. although two instruments that differ in name only may have entirely different treatment under existing ( and outmoded ) legal and regulatory frameworks, the market, credit, liquidity, operational, and reputational risks embodied in them can be identical. to be sure, financial engineering can create derivative instruments that combine risks in complex ways. but, upon analysis, traditional cash instruments that appear simple may have greater risk than the complex instruments that are labelled “ derivative. ” indeed, placing financial instruments in pigeonholes without regard to their true risks and economic functions can create disincentives for prudent risk management - - often with unfortunate results. the structured note phenomenon of 1993 and 1994 is an important example. many institutions shunned “ derivatives ” in favor of these seemingly low - risk securities issued by federal agencies, only to find out later that these instruments had significant price volatility from embedded options. the reaction of many was to label structured notes as derivatives as well, rather than understanding that it was the underlying risk characteristics that had been poorly managed. in its supervisory role, the federal reserve is increasingly emphasizing the need for managing the risks of banking and de - emphasizing a focus on specific instruments. for example, in 1993 we issued examiner guidance on trading and dealer activities. this guidance covered a large spectrum of financial