the use of this unconventional monetary easing on the grounds that weak growth post - crisis is mainly the result of a lack of aggregate demand and thus the solution is to boost demand generally by reducing the cost of borrowing and inducing investors to shift from low - yielding government bonds to riskier assets in search of yields. 12. while there was general agreement on the need and efficacy of action taken by central banks during the crisis period to stabilise the markets, the same cannot be said for using the extremely accommodative monetary easing by the advanced economies to support economic growth and job creation. looking beyond mainstream thinking, there are some sound analyses by renowned economists, such as bill white of the oecd and dr rajan, the former imf chief economist and newly appointed governor of the reserve bank of india, that suggest these unconventional monetary policies are now in “ uncharted waters ” and may create unintended consequences and risks to the global financial system. at this point, i will mention three key costs or risks of these unconventional monetary policies. ( a ) first, these policies punish the savers and pensioners : the suppression of interest rates at close to zero is helpful to debtors, but i should hasten to add that only those debtors who can refinance themselves at the lower rates can benefit. so, most of the us home owners in negative equity or with low credit scores have not been able to benefit from the all - time - low mortgage rates ( which once dropped to as low as 3. 55 % ). at the same time, the low interest rates cause a great deal of harm to savers, whose deposits have been earning virtually no interest at all. there are millions of savers, including households, pensioners, corporates and investment funds that have remained prudent and have avoided falling into the excessive leverage trap. these prudent savers have been punished badly in the past four bis central bankers ’ speeches years under the “ low - for - very - long ” policies. with a sharp drop in recurrent interest income, the behaviour of this group may have changed by scaling down their consumption or investment. this offset, at least partially, the potency of low interest rates and qes. ( b ) secondly, these policies create moral hazard : the suppression of interest rates and the injection of huge amounts of liquidity through qes create considerable moral hazard in several ways. it delays the necessary adjustments in the debt overhang through del

community banks with the financial crisis? a foundation built on good risk management practices and intimate local knowledge helped the successful banks to thrive during one of this country ’ s most difficult financial periods. the banks that prosper in the future will likely have characteristics similar to those that outperformed during the financial crisis. it bears repeating that community banks are critical in keeping local economies vibrant and growing. strong community banks are essential to the provision of credit to small businesses in their localities. see united states government accountability office, financial institutions : causes and consequences of recent community bank failures, statement of lawrance l. evans, jr., director financial markets and community investment, june 13, 2013. also see gilbert et al. ( 2013 ). st. louis federal reserve study shows community bank model can thrive in good times and in bad. bis central bankers ’ speeches importance of small business lending it is often noted that small businesses contribute disproportionately to employment growth in their communities. when you dig a little deeper into this stylized fact, you discover that it is new small businesses that are responsible for this growth. upon reflection, this makes sense given that, by definition, old small businesses are not growing. if they had been growing fast, they would no longer be small. a related fact is that the failure rate is quite high for new small businesses. taken together, this implies that it is important to provide an environment that is conducive to new business formation. the more new businesses that are created, the more that have a chance of surviving and growing into larger, prosperous members of the local economy. on earlier visits in the district, i heard several small business owners voice their concern over their ability to access credit. based on these conversations, i asked my research staff to investigate the degree to which they could substantiate with data whether bronx small businesses seem credit - constrained relative to other boroughs or relative to other comparable counties across the country. they first looked at the share of small business loan amounts made in each borough relative to the share of small businesses located in each borough, using data for 2013 ( the latest available at the time ). if small business credit is equally available, then we would expect to see ratios of approximately one for each borough. what the data show is that the ratio is well below one for the bronx and staten island, with the bronx being the lowest. this is consistent with what i heard during my last visit. broadening the lens of the analysis,