s efforts to stabilize itself and pressed its most senior management to find a longterm solution for its liquidity and capital problems. in the second part, i will review how we attempted to facilitate a rescue from bankruptcy and, when this failed, to mitigate the impact of lehman ’ s demise on the economic system as a whole. lehman ’ s decline the new york fed had no role in supervising lehman brothers. the sec supervised lehman ’ s broker - dealer pursuant to express statutory authority, and, as chairman mary shapiro pointed out in her testimony before the house financial services committee, the sec also supervised lehman ’ s parent holding company under a voluntary program called the consolidated supervised entity ( cse ) program. 1 the federal reserve had a business relationship with lehman ’ s broker - dealer, but our transactions with the broker - dealer were for the most part repurchase agreements done for monetary policy purposes, and purchases and sales of treasury and agency securities. in march, events in our financial system caused several responses that expanded the federal reserve ’ s business relationship with lehman brothers and certain other investment banks. first, the federal reserve announced, on march 11, 2008, what became known as the term securities lending facility ( tslf ). the tslf was designed to address a liquidity problem that we had observed with respect to certain types of mortgage - backed securities. the tslf addressed this problem by enabling primary dealers to borrow from the federal reserve certain securities that they could more easily exchange for cash and secure these borrowings by pledging securities to the federal reserve that were less easy to exchange. this enabled the primary dealers to obtain much - needed liquidity from the market. second, at around the time this program was announced, one of the primary dealers, bear stearns, was experiencing an extraordinary liquidity run. on friday, march 14, 2008, the new york fed received authority from the board of governors of the federal reserve to make a loan that enabled bear stearns to avoid a bankruptcy filing and to continue in operation through the weekend of march 15 and 16. during that weekend, the federal reserve and the united states treasury department facilitated an acquisition of bear stearns by j. p. morgan chase. the federal reserve also developed a new liquidity facility to lend cash directly to primary dealers, the primary dealer credit facility ( pdcf ). the pdcf became operational on monday, march 17, 2008, and it was intended to provide a liquidity backstop for primary dealers who

be very damaging for its franchise value. but, the use of new technology comes with its own risks that require significant investment and attention — especially around cybersecurity. second, in today ’ s low interest rate environment, we have observed that some community banks have taken on more interest rate risk by increasing the maturity of their assets and the average duration of their loan portfolios. in the last rate tightening cycle, we observed that banks with larger concentrations of long - term earning assets experienced lower margins. it will be important for community banks that are very sensitive to interest rate risk to evaluate the risk management of their loan portfolios. finally, when i meet with community bankers, i am often asked the following question : “ when will we see regulatory relief? ” my simple answer is soon, i hope. there is wide ranging consensus — across party lines and among regulators, the federal 1 / 2 bis central bankers'speeches reserve included — that we need to reform the regulatory requirements for small banks. as i have said, i favor regulatory relief for smaller banking organizations. 2 their size and complexity do not pose a significant risk to the system, and they lack the scale to absorb large compliance and other regulatory costs. given broad agreement on this issue, i am hopeful that relief will be forthcoming. let me conclude by saying that we continue to recognize the important role community banks play in our economy. according to a study by our colleagues at the kansas city fed, the u. s. banking system is unique because of its balance between a small number of large banks and thousands of community banks. 3 that balance helps serve the needs of a large and diverse u. s. economy that includes businesses of all sizes and consumers with different needs and preferences. as the u. s. economy continues to grow and expand — as i expect it will — your personalized customer service, commitment to relationship banking, and adaptability to technological advances will serve you and your communities well. i will miss many aspects of my role at the new york fed, particularly the opportunities i ’ ve had to interact with the community bankers in our district. please enjoy today ’ s conference, and thank you for coming. 1 sumeet batra, richard ciccotelli, and jacqueline fenton assisted in preparing these remarks. 2 see william c. dudley, the importance of incentives in ensuring a resilient and robust financial system, march 26, 2018. 3 keeton, william & kahn, george a. & schroed