##makers and market participants alike can best contribute to the development of a reformed and robust financial architecture. i see more promise than peril over the horizon. the speed of these changes in the financial architecture understandably brings fear to some market participants, but it may equally sow the seeds of recovery. policymakers are keenly observing the pulse of private financial institutions and other market participants to gauge their ability to take up the cause of reform and renewal. if financial institutions readily and steadily approach new ways of intermediating credit, the real economy might recover sooner and with more vigor than expected. if not, if private market participants prove unable or unwilling to establish new business models, then the effects of the current financial market turmoil may be a significant drag on economic growth long after stability is ostensibly achieved. getting the architecture right is essential to address the central challenge facing our economy. see warren buffett ( 2008 ), “ buy american. i am. ” an op - ed in new york times, october 17.

end of the transaction. swap facilities were reestablished with central banks in europe ( the ecb, the bank of england, and the swiss national bank ), japan ( the bank of japan ), and canada ( the bank of canada ). the agreements establishing these facilities can be seen at federal reserve bank of new york, “ central bank liquidity swaps. ” amounts outstanding on the swap lines are posted weekly at federal reserve bank of new york, “ federal reserve foreign exchange swap agreements. ” conclusion the agreement of the federal reserve to reinstate foreign exchange swap arrangements was designed not to insulate banks and investors from losses they may incur, but as a prudent effort to help minimize the risk of financial turmoil in europe, with the consequences that would ensue for the global financial system, including the united states. in the worst case, such turmoil could lead to a replay of the freezing up of financial markets that we witnessed in 2008. with unemployment remaining quite high, and with continued need for balance sheet repair by many businesses, financial institutions, and households, it is particularly important that the united states not sustain a significant external shock. the policy measures announced by european authorities a week and a half ago elicited a quick, strongly favorable market reaction, holding out hope that further financial disruptions can be averted. however, as reflected in the negative turn of equity markets later in the week, and continued tight funding in some european markets, uncertainties are still clouding financial markets. market participants continue to seek clarification of the terms and scope of the measures broadly outlined by the relevant european countries and institutions. in europe, a key near - term priority is to continue work to prevent a drying up of liquidity by providing both euro - denominated and, through the dollar liquidity swaps, dollar - denominated credit to financial institutions. but, even if effectively implemented, this support, along with the support for sovereign debt markets provided by the other components of the eu package, will not solve the sovereign debt problems ; it will only provide time to make necessary policy adjustments. lasting beneficial effects will require credible action to bring fiscal deficits under control. for the eu as a whole, it seems clear that the mechanisms of the european economic and monetary union need further development if it is to achieve its intended aims. last week, the european commission issued a communique outlining plans to enhance surveillance and develop a crisis management framework. i would anticipate