whose persistent weakness has had a major impact on economic and financial conditions more broadly, and will improve the financial condition of some households by facilitating refinancing. in addition, open - market purchases should benefit credit markets by adding liquidity and balance sheet capacity to the system. support for specific institutions in addition to those programs i have just discussed, the federal reserve has provided financing directly to specific systemically important institutions. with the full support of the treasury, we used emergency lending powers to facilitate the acquisition of bear stearns by jpmorgan chase & co. and also to prevent default by aig. these extensions of credit are very different than the other liquidity programs discussed previously and were put in place to avoid major disruptions in financial markets. from a credit perspective, these support facilities carry more risk than traditional central bank liquidity support, but we nevertheless expect to be fully repaid. credit extended under these programs has varied but recently has accounted for only about 5 percent of our balance sheet. that said, these operations have been extremely uncomfortable for the federal reserve to undertake and were carried out only because no reasonable alternative was available. as noted in the joint federal reservetreasury statement i mentioned earlier, we are working with the administration and the congress to develop a formal resolution regime for systemically critical nonbank financial institutions, analogous to one already in place for banks. such a regime should spell out as precisely as possible the role that the congress expects the federal reserve to play in such resolutions. liabilities having reviewed the federal reserve's main asset accounts, let me now touch briefly on the liability side of the balance sheet. historically, the largest component of the federal reserve's liabilities has historically been federal reserve notes – that is, u. s. paper currency. currency has expanded over time in line with nominal spending in the united states and demands for u. s. currency abroad. by some estimates, a bit over one - half of u. s. currency is held outside the country. other key liabilities of the federal reserve include the deposit accounts of the u. s. government and depository institutions. the u. s. government maintains a " checking account " with the federal reserve – the so - called treasury general account – from which most federal payments are made. more recently, the treasury has established a special account at the federal reserve as part of its supplementary financing program ( sfp ). under this program, the treasury issues special treasury bills and places the proceeds

have agreed to seek legislation to provide additional tools for managing bank reserves. conclusion these are extraordinarily challenging times for our financial system and our economy. i am confident that we can meet these challenges, not least because i have great confidence in the underlying strengths of the american economy. for its part, the federal reserve will make responsible use of all its tools to stabilize financial markets and institutions, to promote the extension of credit to creditworthy borrowers, and to help build a foundation for economic recovery. over the longer term, we also look forward to working with our counterparts at other supervisory and regulatory agencies in the united states and around the world to address the structural issues – some of which have been discussed in this conference – that have led to this crisis so as to minimize the risk of ever facing such a situation again. the interest rate on reserves did not establish a hard floor on the federal funds rate during the short period between the time that payment of interest on reserves was introduced and the fomc's decision to bring the federal funds rate target close to zero. possible reasons were the unfamiliarity of banks with the program, the fact that some institutions are not legally eligible to receive interest on reserve balances and were therefore willing to lend funds in the federal funds market at a rate below the rate paid by the fed, and the reluctance of banks to use scarce balance sheet space to arbitrage the difference between the federal funds rate and the rate paid on reserves. we expect these problems to be reduced with time.