are broker - dealers that are designated as counterparties by the federal reserve bank of new york for its conduct of open market operations in the implementation of monetary policy. bis central bankers ’ speeches undertook swap agreements with 14 other central banks to help ensure adequate dollar liquidity in global markets and thus keep credit flowing to u. s. households and businesses. conclusion the financial crisis of 2007 – 09 was difficult to anticipate for two reasons : first, financial panics, being to a significant extent self - fulfilling crises of confidence, are inherently difficult to foresee. second, although the crisis bore some resemblance at a conceptual level to the panics known to bagehot, it occurred in a rather different institutional context and was propagated and amplified by a number of vulnerabilities that had developed outside the traditional banking sector. once identified, however, the panic could be addressed to a significant extent using classic tools, including backstop liquidity provision by central banks, both here and abroad. to avoid or at least mitigate future panics, the vulnerabilities that underlay the recent crisis must be fully addressed. as you know, this process is well under way at both the national and international levels. i will have to leave to another time a discussion of the extensive changes in regulatory frameworks, as well as the changes in the federal reserve ’ s own organization and practices, that have been or are being put in place. instead, i will close by noting that the events of the past few years have forcibly reminded us of the damage that severe financial crises can cause. going forward, for the federal reserve as well as other central banks, the promotion of financial stability must be on an equal footing with the management of monetary policy as the most critical policy priorities. bis central bankers ’ speeches

lending. the federal reserve ’ s responses to the failure or near failure of a number of systemically critical firms reflected the best of bad options, given the absence of a legal framework for winding down such firms in an orderly way in the midst of a crisis – a framework that we now have. however, those actions were, again, consistent with the bagehot approach of lending against collateral to illiquid but solvent firms. the acquisition of bear stearns by jpmorgan chase was facilitated by a federal reserve loan against a designated set of assets, and the provision of liquidity to aig was collateralized by the assets of the largest insurance company in the united states. in both cases the federal reserve determined that the loans were adequately secured, and in both cases the federal reserve has either been repaid with interest or holds assets whose assessed values comfortably cover remaining loans. to say that the crisis was purely a liquidity - based panic would be to overstate the case. certainly, an important part of the resolution of the crisis involved assuring markets and counterparties of the solvency of key financial institutions, and that assurance was provided in significant part by the injection of capital, including public capital, and the issuance of guarantees – measures not available to the federal reserve. in these respects, the treasury - managed troubled asset relief program and the fdic ’ s temporary liquidity guarantee program played critical roles. as i have noted, the federal reserve did help restore confidence in the solvency of the banking system by leading the stress tests of the 19 largest u. s. bank holding companies in the spring of 2009. these stress tests, which were both rigorous and transparent, helped make it possible for the tested banks to raise $ 120 billion in private capital in the ensuing months. the response to the panic also involved an extraordinary amount of international consultation and coordination. following a key meeting of the group of seven finance ministers and central bank governors in washington on october 10, 2008, the governments of other industrial countries took strong measures to stabilize key financial institutions and markets. central banks collaborated closely throughout the crisis ; in particular, the federal reserve see brian f. madigan ( 2009 ), “ bagehot ’ s dictum in practice : formulating and implementing policies to combat the financial crisis, ” speech delivered at “ financial stability and macroeconomic policy, ” a symposium sponsored by the federal reserve bank of kansas city, held in jackson hole, wyo., august 20 – 22. primary dealers