do now. in today ’ s environment, bank supervision and deposit insurance have displaced the need for high capital - asset ratios in industrial countries. many of the new participants in the international financial system have had neither elevated capital, nor adequate supervision. this shortfall is now generally recognized and being addressed. there are, of course, other reforms that i believe need to be addressed. these were outlined in my earlier testimonies before this committee.

to this action would likely be lost if implementation were significantly delayed, as private securitization activity would likely be inhibited in the interim. implications for financial markets and monetary policy most recently, as i am sure committee members are well aware, subprime mortgage losses that triggered uncertainty about structured products more generally have reverberated in broader financial markets, raising concern about the consequences for economic activity. as i noted in a speech last month at the economic symposium hosted by the federal reserve bank of kansas city, the turbulence originated in concerns about subprime mortgages, but the resulting global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans. these wider losses reflect, in part, a significant increase in investor uncertainty centered on the difficulty of evaluating the risks for a wide range of structured securities products, which can be opaque or have complex payoffs. investors also may have become less willing to assume risk. some increase in premiums that investors require to take risk is probably a healthy development on the whole, as these premiums have been exceptionally low for some time. however, in this episode, the shift in risk attitudes combined with greater credit risk and uncertainty about how to value those risks has created significant market stress. on the positive side of the ledger, past efforts to strengthen capital positions and financial market infrastructure places the global financial system in a relatively strong position to work through this process. in response to these developments, the federal reserve moved in early august to provide reserves to address unusual strains in money markets. on august 17, the federal reserve board announced a cut in the discount rate of 50 basis points and adjustments to the reserve banks'usual discount window practices to facilitate the provision of term financing for as long as thirty days, renewable by the borrower. the purpose of the discount window actions was to assure depositories of the ready availability of a backstop source of liquidity. the federal reserve also took a number of supplemental actions, such as cutting the fee charged for lending treasury securities. earlier this week, federal open market committee lowered its target for the federal funds rate by 50 basis points. the action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time. recent developments in financial markets have increased the uncertainty surrounding the economic outlook. the committee will continue to assess the effects of these and other developments on economic prospects and will act as needed