but, regardless of whether the sustainable rate is 5 or 6 percent, with unemployment currently at 9 percent, our economy is certainly falling far short of maximum employment. that high unemployment rate is why the federal reserve is focusing its monetary policy at strengthening the recovery and job creation, including keeping short - term interest rates near zero and longer - term rates, such as mortgage rates, at the lowest levels in decades. keeping borrowing costs very low supports consumer purchases of houses, cars, and other goods and services, as well as business investment in new equipment, software, and facilities. over time, greater demand on the part of households and businesses leads to increased economic activity and employment. like other central banks around the world, one way in which we have put downward pressure on longer - term interest rates is by purchasing high - quality, longer - term securities in the open market – specifically, in our case, u. s. government securities and federally backed mortgage securities. it is important to understand that this type of activity isn ’ t the same as government spending. we will sell the securities back into the market or simply allow them to mature as part of the process of tightening monetary policy when the economy improves. in the meantime, we earn interest on the securities we hold. in fact, the federal reserve ’ s securities purchases and other actions during and after the crisis have had the side effect of reducing the federal budget deficit. last year and the year before, we returned a total of $ 125 billion of those earnings to the u. s. treasury, and payments to the treasury in the current year will be substantial as well. in addition to our monetary policy role, the federal reserve shares responsibility with other government agencies for regulating and supervising banks, protecting consumers in their financial dealings, and fostering financial stability. we ’ re working with the other agencies to significantly increase the financial reserves that banks – especially the largest banks that can put the financial system at risk – must hold against possible losses. the fed and the other agencies also are toughening the restrictions on the kinds of financial transactions that banks can undertake and working to ensure that bankers ’ compensation packages do not give them incentives to take excessive risks. we are requiring banks to compensate and assist foreclosed - upon homeowners who were unfairly treated. and, importantly, we are working to increase the resilience of the financial system as a whole against financial and economic shocks that may occur in the future. we are also collaborating with the federal deposit insurance corporation

of work in 2012 is to take concrete steps to advance the useful analytic work that has been done in the basel committee and the financial stability board ( fsb ) on the resolution of financial firms with substantial international presence. here in the united states, the dodd - frank act provides for an orderly liquidation process. some other jurisdictions have, or are planning to, put in place comparable special - resolution mechanisms. but the co - existence of internationally active firms with nationally based insolvency regimes means that there can be potentially important transborder legal complications when a home jurisdiction places into receivership a firm with significant assets, subsidiaries, and contractual arrangements in other countries. a comprehensive, treaty - like instrument for a global bank resolution regime is almost surely not achievable in the foreseeable future, and perhaps well beyond that. but there should be room for more limited cooperation agreements, coordinated supervisory work on resolution plans, and other devices to make the orderly resolution of a large internationally active firm more feasible. similarly, the limits of even well - conceived liquidity requirements suggest a second item that warrants attention in international fora – namely, the problems connected with wholesale bis central bankers ’ speeches funding channels over the last several years. broadly speaking, threats to financial stability can arise in two ways : first, through the rapid deterioration or failure of a large institution with leverage sufficient to produce widespread knock - on effects and, second, through the breakdown of a significant market in which large numbers of leveraged actors depend upon similar sources of liquidity and backup liquidity. while these two sources of systemic risk can be, and usually are, related, the latter has not been the subject of the broad reform agenda directed at the former. you will note that the basel iii liquidity standards do not require global banks to reduce their usage of wholesale funding ; instead, they require a bank that uses more volatile funding sources to hold more liquid assets. this requirement is critical to a sounder financial system, to be sure, but it does not address completely the potential instability associated with wholesale funding – even in the regulated institutions subject to these requirements, much less in the rest of the financial system. we will need further measures if we are to mitigate the risks of runs seen in 2007 – 2008 and, somewhat less dramatically, more recently. because the risk of runs in wholesale funding manifests itself in different ways in different countries ’ financial systems, the appropriate response will likely be a mix of national and international actions, not