it serves as a primary benchmark for pricing in other financial markets, both domestic and global. last, but definitely not least, it ’ s vitally important for the effective transmission of monetary policy to the broader financial system and to the economy. thankfully, most days — most years — the treasury and related markets function incredibly well. but in the past decade, these markets have experienced three abrupt and notable disruptions, each of increasing severity. first was the so - called flash rally of october 2014 ; then, the repo market distress in september 2019 ; and third, the extraordinary dislocations at the onset of the covid - 19 pandemic in march of 2020. general george patton once said, “ prepare for the unknown by studying how others in the past have coped with the unforeseeable and unpredictable. ” it ’ s a good piece of advice — and one that 1 / 4 bis central bankers'speeches should guide our work on treasury market reform. the iawg report i mentioned earlier reviews these events, so i won ’ t repeat them here. however, two lessons are clear. first, the unforeseeable and unpredictable will happen, and can result in significant stresses in the treasury and related markets that may spread to broader financial conditions. second, when disruptions have been sufficiently severe and persistent, the market has not been able to quickly self - correct without official - sector intervention. the severe disruptions to the treasury and funding markets in march of last year illustrate these points. the incipient breakdown in market functioning quickly spread to other segments of the u. s. and global financial markets, risking a broad - based pullback in the availability of credit that is essential for our economy. the speed and extent of the market disruption necessitated immediate and dramatic action, the scale of which was truly unprecedented. at the new york fed, we are used to talking in very large sums, but even for us, the figures were staggering. we were offering overnight repos of up to $ 1 trillion, as well as substantial amounts of term repos of longer maturities. 2 the sizeable offerings were designed to meet the markets ’ needs and provide confidence that liquidity would be available. at their peak in mid - march of 2020, our repo operations reached nearly $ 500 billion. but repos alone were not enough to restore smooth market functioning. the fomc also directed the open market trading desk at the new york fed to engage in large

william c dudley : lessons learned from the financial crisis remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the eighth annual bis conference, basel, 3 july 2009. * * * in assessing the lessons of the past two years, i will focus on five broad themes that are interrelated : • interconnectedness of the financial system • system dynamics – how does the system respond to shocks? • incentives – can we improve outcomes by changing incentives? • transparency • how should central banks respond to asset bubbles? as always, my views are my own and may not necessarily reflect those of the fomc or the federal reserve system. interconnectedness this financial crisis has exposed how important the interconnections are among the banking system, capital markets, and payment and settlement systems. focus on only one part of the financial system can obscure vulnerabilities that may prove very important. for example, the disruption of the securitization markets caused by the poor performance of highly - rated debt securities, led to significant problems for major financial institutions. banks had to take assets back on their books ; backstop lines of credit were triggered ; and banks could no longer securitize loans, increasing the pressure on their balance sheets. this reduced credit availability, which increased the downward pressure on economic activity, which caused asset values to decline further, increasing the degree of stress in the financial system. the high degree of interconnectedness across the financial system has a number of implications. first, supervision must not just be vertical – firm by firm, or region by region, but also horizontal – looking broadly across banks, securities firms, markets and geographies. second, this means that supervisory practices need to be revamped. they need to be coordinated and multi - disciplinary. i think the u. s. treasury is right in proposing a systemic risk regulator as part of their regulatory reform plan. but, we shouldn ’ t kid ourselves about how difficult this will be to execute. you will need a flexible and dynamic governance process to be able to identify the important elements of systemic risk, to elevate those concerns to the appropriate level and then to act on those concerns in a timely manner. it will take the right people, with the right skill sets, operating in a system with the right culture and legal framework. i don ’ t believe creating this oversight process will be an easy task. consider, for example, subprime