than 2. 7 percent from 1980 to 2010, with per capital incomes rising a total of about 40 percent over the period. see gary becker and kevin murphy ( 2009 ), " do not let the'cure'destroy capitalism, " financial times magazine, march 19. whether by good fortune or good policy, between the start of the great moderation in the mid - 1980s and the end of 2007, the standard deviation of annualized quarterly real u. s. gdp growth was 2. 1 percent, less than half as large as its value over the two previous decades. but, as i remarked to another group of international financiers more than two years ago : " the great moderation … is neither a law of physics nor a guarantee of future outcomes. it is only a description – an ex post explanation of relative prosperity. if policymakers and market participants presume it to be an entitlement, it will almost surely lose favor. " 8 well, warnings notwithstanding, it was treated like an entitlement by far too many in the private and public sector, and as a result, lost considerable favor. the panic of 2008 has the experience of the last 20 months caused the findings of the vaunted growth experiment to be fundamentally revised? during this recent period of turmoil, the imponderable, or what was previously thought to be virtually impossible, happened with great speed and force and frequency. 9 asset prices plummeted, and market volatility reached its highest level in decades. financial market functioning was deeply impaired across most asset classes and geographies. as a result, the u. s. economy endured a sudden stop. in the final quarter of last year and the first quarter of this year, private employment registered the largest two - quarter percent decline since the mid - 1970s, and real gdp saw the most dramatic decline in a half - century. these data are clearly indicative of significant deviance, and justifiably raise questions about the success of the growth experiment. policymakers are rightly disposed to react, respond, and revisit the presumed record of accomplishment. in revising the historical record, however, we should not too hastily discount the preceding period of prosperity. we must avoid a classic case of what behavioral economists term " availability bias, " when decisions made are influenced disproportionately by more recent events. ultimately, i will leave it to economic historians to assess whether the panic of 2008 was more anomalous than

financial sector. the various forms of misconduct impose direct costs such as fines, legal fees in investigating allegations and defending lawsuits, and internal monitoring costs that should matter to firms. in this view, a principal benefit to a financial firm of having a strong culture that builds trustworthiness is the avoidance of the bad behavior that can carry significant monetary costs and can inflict destructive damage to the organization ’ s reputation. firms should have every incentive to manage and internalize those potential costs. more broadly, there may be additional adverse effects on other firms or the financial sector as a whole if there is a widespread lack of trust in financial services. similarly, my colleague michael strine has argued that the financial industry exists, in part, to enhance the public good and thus faces a higher degree of social responsibility due to its role in supporting the broader economy. 4 both of these effects suggest a role for the public sector in facilitating appropriate behavior and conduct in the financial services industry. supervision can contribute to this through support for the development of effective internal governance regimes, prudent risk management policies, and strong compliance and control structures, all within a framework of effective oversight from the board of directors. conclusion to conclude, i ’ ve spoken today about the conceptual rationale for public sector intervention through supervision and some practical issues related to how we execute on our supervisory responsibilities at the federal reserve bank of new york. our goal is to promote a safe, sound, and stable banking and financial system that supports the growth and stability of the u. s. economy, and we will continue to strive to meet these responsibilities. thank you very much for your attention this afternoon. i ’ d be happy to take some questions. forming the next generation of bankers : the future of business education and ethics, michael strine, march 22, 2016. bis central bankers ’ speeches