the extraordinarily large ‘ moral hazard ’ that has arisen over the past year is to require banks and possibly all financial intermediaries to hold contingent capital bonds, that is, debt which is automatically converted to equity when equity capital falls below a certain threshold ”. “ however, should contingent capital bonds prove insufficient, we should allow large institutions to fail, and if assessed by regulators as too interconnected to liquidate quickly, be taken into a special bankruptcy facility ”. so, he supports the second approach, and in that light is the latest legislation in the usa which is about to be adopted, as well as the proposals in europe which envisage measures of this kind. namely, “ restoring american financial stability act ”, which was passed in the us senate on may 20, would impose significant new obligations and restrictions for the sifis, envisaging a possibility for the fed to introduce rising strict rules for capital, leverage and liquidity. on the other hand, on may 26, the european commission proposed the member states to establish national funds, financed from taxes imposed on the financial sector, in order to assist in closing or reorganizing the unsuccessful banks. the macroprudent tools mentioned so far, do not by any means exhaust the list of suggestions. exploring adequate instruments continues, and we are all waiting to see what will be delivered both in the form of ideas and in the form of operational tools. iii. the crisis has proved that the price stability is not sufficient to achieve financial stability. basically, with small exceptions that have no impact on the adoption of political decisions, the dangerous influence of the growing imbalances in the financial system was not conceived. the central banks were happy for registering low inflation rates, so it seemed to sidetrack the rapid credit growth ; the lower risk aversion ; the increase in asset prices, and consequently, the mounting vulnerability on the financial market. that is why, o. blanchard and others, ( 2010 ) say that : “ the crisis has made clear that policymakers have to watch many targets, including the composition of output, the behavior of asset prices, and the leverage of different agents. it has also made clear that they have potentially many more instruments at their disposal than they used before the crisis. the challenge is to learn how to use these instruments in the best way. ” recently, petra m. geraats ( mаy 2010 ), concluded in the same direction : “ recent financial crises

thing to do with your money is to leave it where it is, but our responsibility is to make sure the public knows that currency is readily available. and it is. we finished building up our currency inventory in august, and depository institutions are arranging to have a large amount of extra cash in their vaults as well. separately, the board has taken several steps to ensure bank and thrift customers continuous access to funding. first, we advised the industry to make the advance arrangements necessary to borrow at the discount window, and many have already done so. and we created an administrative structure to more easily serve the backup needs of credit unions. we also created a special liquidity facility to provide banks and thrift institutions access to funds at a predetermined price. this borrowing arrangement will be available as from 1 october. its creation sends a clear message : the fed will be there to provide liquidity should banks need it. that, in turn, will enable banks to offer their customers similar assurance. earlier this month, the federal reserve bank of new york announced several changes to its daily open - market procedures intended to ensure the smooth operation of financial markets around the century rollover. all of these actions have a common theme. they are meant to build confidence that the fed is determined to play its traditional role as a provider of liquidity in uncertain times. summary in sum, our systems are ready. we are working to build public confidence. we will be on the job constantly during the rollover period and we will be prepared for any problems that may arise. no one can guarantee the complete absence of isolated glitches, but americans should feel confident the federal reserve and our depository institutions have done everything that can be done to make the transition to the year 2000 as smooth as possible.