” entered the lexicon of modern central banking. for those few who are unaware, section 13 ( 3 ) was added to the federal reserve act during the great depression. it gave the board of governors broad authority to permit a reserve bank to lend in exigent and unusual circumstances provided that the reserve bank was secured to its satisfaction. prior to the crisis, section 13 ( 3 ) loans had last been made during the depression, to such enterprises as a typewriter manufacturer and a vegetable grower. 4 fed policy makers and their advisors pulled section 13 ( 3 ) back off the shelf, perhaps brushing some metaphorical dust off its cover. in 2008, loans made pursuant to section 13 ( 3 ) facilitated jpmorgan chase ’ s purchase of bear stearns. loans under 13 ( 3 ) also prevented the potentially catastrophic failure of american international group ( aig ). innovations under 13 ( 3 ) also underpinned many of the fed ’ s broad - based facilities to provide market liquidity. the fed created a variety of facilities under 13 ( 3 ), giving rise to an alphabet soup of new acronyms. 5 those facilities provided liquidity to different segments of our economy, ranging from primary dealers to issuers of commercial paper. their broader purpose, however, was to facilitate the availability of credit to businesses and households through on - lending. not all of the fed ’ s responses involved lending, either under section 13 ( 3 ) or at the discount window. on the supervisory side, the federal reserve ’ s supervisory capital assessment program ( scap ) ( the “ stress test ” of the 19 largest us financial institutions ) addressed uncertainty about their ability to weather additional losses. the results were disclosed publicly in a significant departure from standard practice to keep supervisory information confidential. transparency, as well as the availability of a government backstop, encouraged confidence in us institutions. of course, the fed ’ s actions did not happen in a vacuum, but rather in the context of other actions taken by other regulators and congress. perhaps most notably, in october 2008, congress passed the emergency economic stabilization act. that statute allowed, among other things, treasury to create the troubled asset relief program to inject capital into financial institutions. in addition, the federal deposit insurance corporation expanded its guarantees of bank liabilities under the temporary liquidity guarantee program. the federal housing finance agency placed fannie mae and freddie mac into conservatorship. non - us authorities responded to crises in their own jurisdictions. and really this

that may be worth reassessing. one place to start is with regulations pertaining to smaller banks. people of all political stripes tend to agree that congress and regulators should reassess the effect that regulations have had on these firms and whether such regulations are commensurate with their level of risk. for these smaller banks, whose failure will not directly inflict large costs or stress on the broader financial system, the regulatory and compliance requirements should be reconsidered. indeed, banking agencies have announced many proposals for small banks, 11 including one that would simplify the capital rules for such banks consistent with their risk. 12 with respect to systemically important firms, i think it would be terribly myopic to forget the crisis. there have been a number of different types of changes proposed with respect to these firms. today, i ’ d like to focus on the proposals relating to resolution regimes. congress established ola when memories of lehman brothers ’ failure were fresh. it bears repeating that congress did so after facing the terrifying realization that the lack of a credible 4 / 6 bis central bankers'speeches resolution mechanism for dealing with failing systemic firms left only bad choices, such as lending into a run, bailout, or the collapse of the financial system. over the past several years, there have been efforts in congress to repeal ola and create a new, bespoke process for systemically important firms under the bankruptcy code. that process would largely mimic many of the features of the fdic ’ s single point of entry strategy intended for use in an ola proceeding. those efforts have picked up steam this year with the passing of two different bills in the house of representatives. 13 from my perspective, there are attractive aspects to both ola and the bankruptcy code. ola is largely an administrative process that has the benefit of agility. it is administered by the fdic, which will already have insight into the institution though the living will process. the fdic also communicates with foreign regulators regarding systemically important firms. ola has particular advantages in the context of a cross - border resolution, which means in this day and age the resolution of pretty much any systemically important institution. us regulators have established relationships with their foreign counterparts, and resolution processes similar to ola now exist in many globally important financial centers. this familiarity can facilitate crossborder cooperation and coordination in the event of a failure of a systemically important institution, and stem competing insolvency proceedings in multiple jurisdictions and