asset - price boom. if a run - up reflects a bubble, the ensuing price bust could obviously be viewed as its bursting. alternatively, asset prices may have been driven up by expectations of a productivity boom, which would lead to improved earnings. in that case, if the expected productivity boom does not subsequently materialize, asset prices will fall. the end result in this case would not be termed the bursting of a bubble. nonetheless, this case may be indistinguishable from such an experience : among other common elements, one could also see an investment overhang in the sector that saw its asset prices rise and subsequently fall. recessions are almost always accompanied by asset - price declines. but such declines sometimes appear to be the source of adverse surprises, and asset - price busts may subsequently have disproportionately adverse consequences. falling asset prices create a negative wealth effect and restrain consumption. by making collateral less valuable, they also increase the risk of lending to businesses and thereby worsen the lending terms faced by borrowers. when asset prices fall substantially, lenders may also find themselves holding substantial amounts of nonperforming loans that are backed by what may have become, in some cases, worthless collateral. for this reason, recessions that are preceded by asset - price booms and busts may also be associated with problems in the banking industry. in such episodes, the ensuing loss of intermediation may serve as an additional force acting to prolong and deepen what might otherwise have been a milder recession. concerns about the severity of downturns that follow significant asset - price collapses suggest that the identification and analysis of boom - bust asset - price cycles could be useful for policy. for that reason, i would next like to briefly review some of the issues associated with detecting asset - price bubbles. detecting bubbles the word bubble is sometimes employed to describe any quick and large increase in asset prices, but a more precise definition would associate bubbles with only those increases in asset prices that are not due to economic fundamentals. 4 under such a definition, a bubble is present when investors buy assets at prices above their fundamental values in the expectation of being able to sell them at even higher prices in the future. 5 to be sure, such departures from fundamentals may start small, but over time they could grow explosively. the fundamental price of an asset typically is defined in terms of the discounted present value of the income stream or equivalent services that the asset is

and the fdic last summer. the initial round has yielded valuable information that is being used to identify and assess key challenges to resolvability under the bankruptcy code ( title i plans ). the title i plans will help to focus firm efforts to mitigate those challenges so that bankruptcy may be a viable resolution strategy for large institutions. these plans will also support development of the fdic ’ s backup resolution plans under ola ( title ii plans ). the resolution plan process is iterative by design. there is still much work to be done by firms, domestic and foreign regulators, and national governments. we remain committed to ensuring that this work is done quickly but responsibly in the coming years. that brings us to the question of special resolution regimes. in october 2011, immediately before i was nominated to the federal reserve board, i helped design a public simulation of the failure of a large financial institution under ola. the cast included former senior government officials as well as leading experts from the private sector. the fdic, the federal reserve, and the industry offered their assistance as we developed the simulation. from the outset, my earlier experience had led me to be skeptical about the possibility of resolving one of the largest financial companies without destabilizing the financial system. today ’ s global financial institutions are of staggering size and complexity. i believed that an attempt to resolve one of these firms – a firm with multiple business lines carried out through see ben s. bernanke ( 2012 ), “ banks and bank lending : the state of play, ” speech delivered at the 48th annual conference on bank structure and competition, chicago, illinois ( via satellite ), may 10. bis central bankers ’ speeches countless legal entities, across many jurisdictions and different legal systems – could easily spin out of control. the result could be greatly increased uncertainty for creditors and counterparties, which could trigger or accelerate a run on the failed institution that could quickly spread and destabilize the whole system. as we developed the simulation, however, i came around to the view that it is possible to resolve a large, global financial institution. what changed my mind was the fdic ’ s innovative “ single - point - of - entry ” approach, which was just coming into focus in 2011. this approach is a classic simplifier, making theoretically possible something that seemed impossibly complex. under single point of entry, the fdic will be appointed receiver of only the top - tier parent holding company of the