right path and hopefully the broader research community can start to work on some of these important issues. references bank of england ( 2013 ). “ liquidity insurance at the bank of england : developments in the sterling monetary framework. ” carlson, mark, burcu duygan - bump, and william nelson ( 2015 ). “ why do we need both liquidity regulations and a lender of last resort? a perspective from federal reserve lending during the 2007 – 09 u. s. financial crisis. ” finance and economics discussion series 2015 – 011. washington : board of governors of the federal reserve system. eisenbach, thomas, andrew haughwout, beverly hirtle, anna kovner, david lucca, and matthew plosser ( 2015 ). “ supervising large, complex financial institutions : what do supervisors do?, ” federal reserve bank of new york staff reports, no. 729, may. federal reserve ( 2007 ). press release august 17, 2007. goodfriend, marvin and jeffrey m. lacker ( 1999 ). “ limited commitment and central bank lending. ” federal reserve bank of richmond economic quarterly, volume 85 / 4, fall. keister, todd ( 2016 ). “ bailouts and financial fragility. ” review of economic studies, vol. 83 : 704 – 736. tarullo, daniel k. ( 2014 ). “ liquidity regulation. ” november 20, 2014, speech at the clearing house 2014 annual conference, new york. tucker, paul, ( 2016 ). “ the political economy of central bank balance sheet management. ” may 5, 2016, prepared for a workshop jointly sponsored by columbia university ’ s school of international and public affairs and the federal reserve bank of new york, new york. see tucker ( 2016 ) for a consideration of these issues. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

multidisciplinary committee of liquidity experts from across the federal reserve. in clar, supervisors assess the adequacy of liscc portfolio firms ’ liquidity positions relative to their unique risks and test the reliability of these firms ’ approaches to managing liquidity risk. clar provides a regular opportunity for supervisors to respond to evolving liquidity risks and firm practices over time. see tarullo ( 2014 ) for more detail. see eisenbach et al. ( 2015 ). bis central bankers ’ speeches monetary policy implementation frameworks. we should carefully consider the incentives any of our tools create. instead, the message i would like to convey is that there may be benefits to specialization among complementary functions of the central bank. making sure that banks don ’ t take excessive liquidity risk is a core role of supervision, and supervisors are likely to be much better at this task than the staff of market operations departments. providing liquidity to financial markets in real time, to make sure money markets remain connected, that the stance of monetary policy is appropriately transmitted to the real economy, and to support financial stability, is a core role of market operations departments. a long history of financial crises has shown that central banks can add liquidity to the system when it is most needed, especially at time when private institutions are unable to do so. balance sheet normalization my discussion so far has focused on the longer - run. however, the current situation also needs to be taken into account : today, many advanced economy central banks find themselves in a situation where their policy rate is at or close to zero, and policy accommodation is being added or maintained by asset purchases and forward guidance. for example, the fomc has indicated that it will continue reinvestment of principal payments on its portfolio until normalization of the fed funds rate is well underway. as can be seen in figure 7, market estimates of when the soma portfolio will start to normalize have moved out from the end 2015 to the middle of 2018 or even later. ulrich expresses a strong preference for a balance sheet which is short or lean, i. e. closer in size to the amount of currency outstanding. 20 the argument for such a lean balance sheet in normal times is strong and is encapsulated in the federal reserve ’ s 2014 policy normalization principles and plans. that said, if asset purchases work through stock effects and, thus, require a long holding period, how exactly do we get to a lean balance sheet