in what we will all learn from this work. i would also like to highlight that the reinventing our communities conference will be held here in baltimore from october 1st through 3rd. this is an excellent conference that draws on resources from across the federal reserve system, along with johns hopkins university, to highlight effective models and emerging strategies for investing capital to foster economic growth by enabling every individual to contribute to and derive benefit from the economy. the federal reserve system has a valuable perspective because we are in communities all across this nation and because as a supervisor we engage with banks as they seek to fulfill their affirmative obligations to meet the credit needs of their communities. i have seen the value of the community reinvestment act ( cra ) as a vital tool to address the credit needs of lowand moderate - income communities, and i believe the time is ripe for a refresh to make it even more relevant to today ’ s challenges. as you may know, the treasury department recently completed an extensive outreach effort related to modernizing the cra regulations. we look forward to working with the office of the comptroller of the currency, and the federal deposit insurance corporation, with which we have traditionally issued joint rulemakings on cra. the federal reserve is deeply committed to the community reinvestment act ’ s goal of encouraging banks to meet their affirmative obligation to serve their entire community, and in particular the credit needs of low - and moderate - income communities. as we have seen all over the country, when banks are inclusive in their lending, it helps low - and moderate - income communities to thrive by providing opportunities for community members to buy and improve their homes and to start and expand small businesses. we employ an extraordinary group of cra examiners and community development professionals to make sure that we do our part to help banks meet this obligation, as the statute directs. we are very proud of the role we play in educating banks on the cra ’ s provisions, introducing them to potential partners in the community, and keeping them informed of best practices in the field. in fact, one of cra ’ s important achievements has been to help foster the growth of the community development field by building stronger relationships between financial institutions and community and economic development professionals. this development has expanded the number and range of opportunities for banks to lend and invest in safe and sound ways, benefiting both banks and their communities. the current cra regulations date back to 1995. in the two decades since, there have been substantial changes

. in an environment of weak financial systems, lax supervisory regimes, and vague guarantees about depositor or creditor protections, bank runs have occurred in several countries and reached crisis proportions in indonesia. uncertainty and retrenchment have escalated. the state of confidence so necessary to the functioning of any economy has been torn asunder. vicious cycles of ever rising and reinforcing fears have become contagious. some exchange rates have fallen to levels that are understandable only in the context of a veritable collapse of confidence in the functioning of an economy. a similar breakdown was also evident in mexico three years ago, albeit to a somewhat lesser degree. in late 1994, the government was rapidly losing reserves in a vain effort to support a currency that had come under attack when the authorities failed to act expeditiously and convincingly to contain a burgeoning current account deficit financed in large part by substantial short - term flows denominated in dollars. these two recent crisis episodes have afforded us increasing insights into the dynamics of the evolving international financial system, though there is much we do not yet understand. with the new more sophisticated financial markets punishing errant government policy behavior far more profoundly than in the past, vicious cycles are evidently emerging more often. for once they are triggered, damage control is difficult. once the web of confidence, which supports the financial system, is breached, it is difficult to restore quickly. the loss of confidence can trigger rapid and disruptive changes in the pattern of finance, which, in turn, feeds back on exchange rates and asset prices. moreover, investor concerns that weaknesses revealed in one economy may be present in others that are similarly situated means that the loss of confidence can quickly spread to other countries. at one point the economic system appears stable, the next it behaves as though a dam has reached a breaking point, and water ( read, confidence ) evacuates its reservoir. the united states experienced such a sudden change with the decline in stock prices of more than 20 percent on october 19, 1987. there is no credible scenario that can readily explain so abrupt a change in the fundamentals of long - term valuation on that one day. such market panic does not appear to reflect a simple continuum from the immediately previous period. the abrupt onset of such implosions suggests the possibility that there is a marked dividing line for confidence. when crossed, prices slip into free fall - - perhaps overshooting the long - term equilibrium - before markets will stabilize. but why