stringent, forward - looking assessment of prospective losses and revenues at the 19 largest u. s. regulated financial institutions. we took the unusual, if not unprecedented, step of releasing publicly the methodology and findings of the scap, including the capital needs and loss estimates for the 19 institutions. the decision to make this information public was made in the context of a systemic crisis, in which markets were hungry for information and in which the treasury stood ready to inject capital into any of the 19 institutions that were found to need it. even so, it was much debated within the federal reserve, in part because of concerns that weaker banks might be significantly harmed by the disclosures. but i think that regularizing both stress tests and the release of information relevant to them deserves serious consideration for at least two reasons. first, in line with my earlier discussion of market discipline, releasing such information could assist investors in the difficult task of valuing loan portfolios that at present are not very transparent. second, releasing details about assumptions, methods, and conclusions would expose our supervisory approach to greater outside scrutiny and discussion. whether the result is critique or validation of our approach, the reaction of informed investors and analysts to our assumptions and methods would be beneficial. i have previously identified several ways we might increase the transparency of our stress tests. 2 there are doubtless additional possibilities. there are, to be sure, countervailing concerns. in economic times more normal than those prevailing when we conducted the scap, market participants will not be fearing the worst and banks will not have access to government capital injections as a backstop. at such a moment, the revelation that some major banks may have capital needs under a stress scenario might be unnecessarily destabilizing, though the possibility of this kind of market reaction may be lower if such information is released frequently. major unpleasant surprises would be less likely with see daniel k. tarullo ( 2010 ), “ lessons from the crisis stress tests ”, speech delivered at the federal reserve board international research forum on monetary policy, washington, march 26. frequent, detailed disclosures. in any case, i hope that interested parties will consider the merits of these possibilities and help advance the debate. there are other ways to incorporate non - governmental views into the regulatory system. we have already taken steps in this direction in conjunction with the federal reserve ’ s overhaul of its approach to supervising the largest financial holding companies. as part of this effort – and with the aim

s ability to provide the additional currency would be constrained by its gold reserves. to protect themselves, the commercial banks and the central bank established clearing houses to provide, in case of the run on any particular participating bank, the currency to each other. that was in fact a financial stability remedy, of course, being a product of its time. after the second world war the abandonment of the “ golden standard ” changed things completely. the introduction of the fiat money changed the monetary policy framework dramatically, forcing the financial stability issues to take back seats in the central banks considerations. there were two main reasons for financial stability being less of a worry. first, by using the fiat money the role of the lender of the last resort was not limited anymore. the central bank could lend to commercial banks as much as they wanted to borrow, just printing new money. there was no need to hold a parity to anything. second, many central banks faced serious troubles in order to meet their ultimate target, the price stability, within the new fiat money environment. therefore the policy focus shifted and huge effort was concentrated on finding a new appropriate policy framework. the situation was even more complicated due to the fact that both aforementioned points were closely interdependent. to illustrate this point, let's assume that there was an inflationary pressure which caused redistribution disturbances to the financial system as it led to the redistribution of wealth from lenders to borrowers. the central bank either had not established the appropriate framework for dealing inflation yet, or even worse, inflation had not been viewed as an undesirable phenomenon. on the other hand, the central bank was ready to fulfil its role as a lender of last resort. but saving the commercial banks from imminent bankruptcy further increased inflationary pressures. at the end this caused kind of inflationary trap. it was not surprising that during those times the financial stability was not of a main concern for the central bank. as the central banks learnt during the second half of eighties to deal more properly with inflationary disturbances, the price stability was broadly achieved again. consequently, the interest in financial stability issue has been increasing during the nineties. in my opinion, there are two main reasons for it. first of all, central banks have learnt one important rule : that their role of the lender of last resort is something the central bank should be ready to fulfil, but in fact it is optimal, never to do it in practice. second of all, the