for everybody. avoiding a widespread loss of trust requires a systematic and co - ordinated effort to fix the flaws and weaknesses that can undermine investor confidence. it is important that there is a set of reasonable rules - so that chief executives, boards, and their auditors truly and fairly disclose the financial position of their companies and that investing public can rely on the truth, fairness, and completeness of that disclosure. now, in spite of the specific flaws that several well - known firms have revealed, it has become clear that much of the public ’ s confidence in the efficient operation of financial markets remains intact. the recent events involving accounting fraud and abuse of management power remind us that we cannot be complacent even once it is felt that the current problems are behind us. memories can fade quickly. even if the worst is behind us, the responsibility lies in the market participants to apply the lessons of this particular period to stop its recurrence in the future. we must continue to be vigilant. the market ’ s response the market participants have already reacted by themselves. we have seen much self - evaluation in recent months. i am encouraged by how seriously these issues are being taken. the market is enforcing its own discipline. corporate boards are re - examining their roles and taking a closer look at what is being done in their companies. investors are demanding greater reconciliation between pro forma financial statements and generally accepted accounting principles. but this is not enough. the apparent breakdown of the checks and balances that served us reasonably well in the past has prompted debate about the need for tougher financial market rules. potentially new rules need to be written. and when unscrupulous market participants or practices are revealed, authorities must come down on them with full force. to do otherwise is to do markets a disservice. only strict reprobation will restore and maintain confidence that the rules are being enforced. regulatory and supervisory bodies around the globe have begun to deal with the high - profile bankruptcies. in the united states, the financial accounting standards board is looking at proposals to determine when so - called special purpose entities should be consolidated on company balance sheets. the securities and exchange commission has proposed new rules for more detailed and timely corporate disclosure. major firms, in response to those demands, are changing their corporate reporting methods. there is the clear recognition of the need to eliminate potential conflicts of interest - where auditors are able to offer additional services. this has raised other issues of rotation of

ms. phillips reassesses the stock market crash of 1987 in the context of subsequent market and regulatory changes remarks by ms. susan m. phillips, a member of the board of governors of the us federal reserve system, at bentley college, waltham, massachusetts on 15 / 10 / 97. black monday : 10 years later thank you for inviting me to participate in this program sponsored by the financial women ’ s association. we are drawing very close to the tenth anniversary of the stock market crash. it is useful to reassess that event in the context of subsequent market and regulatory changes. the crash was one of those ( fortunately rare ) events that serve as a watershed for our discussion of markets and public policies. considerations of regulatory approaches now almost always use the crash as a reference point. panels such as this one provide a vehicle for evaluating not only what we have learned from the event but also the various actions taken following the crash. but it is also appropriate to look forward. changes in financial markets and the risk management capability of firms have been significant in the intervening years. the crash may no longer be as useful a reference point for judging events and evaluating public policy responses. i suppose everyone can remember what they were doing on the day of the crash. i had the good fortune to have left the cftc prior to the crash. thus, i got to watch events unfold from the cornfields of iowa. later, however, i participated in several post - crash evaluations. even now, at the federal reserve board, the crash periodically comes up in supervisory discussions about bank risk. ( regrettably, the crash is now part of a pantheon of financial market “ problems ” that include barings, daiwa, metallgesellschaft, orange county, and sumitomo. ) the legacy of the crash the legacy of the crash is both tangible and intangible. an impressive number of studies of the crash were done. the more noteworthy ones take up about three linear feet on my bookshelf, a very tangible reminder. more seriously, the studies done after the crash were wide - ranging and examined events through the eyes of many different market participants, many different regulators, and a host of academicians. they identified weaknesses in trading and clearing systems that have resulted in tangible changes to those systems. these changes have been very positive. exchanges have greatly expanded their ability to handle surges in volume, for example. the capitalization of market makers has been bolstered as