wake of the porter commission, canada revised its financial legislation in some crucial ways. canadian banks responded to the new competitive environment by innovating and enhancing efficiency. canadian institutions became world leaders, as financial institutions in many other countries were still operating under more restrictive and less - efficient regulatory regimes. over the next three decades, canada continued to lead the world. successive revisions of legislation covering financial institutions encouraged greater cross - pillar competition in some areas, leading to lower costs and improved efficiency. but over the past decade, other countries have caught up and are forging ahead. during this time, two trends changed the global environment for financial institutions. first, with the expansion of world trade, national markets became truly global. financial institutions had to find ways to provide enhanced services to customers worldwide. second, other countries - particularly the united states and the united kingdom - began to align their regulatory frameworks with the 2 / 4 competitive philosophy of the porter commission. the regulatory barriers that had held back competition, both geographically and among different types of institutions, began to fall rapidly. out of this more open and competitive environment came consolidation - not just among institutions but across pillars and jurisdictions. as a result, foreign institutions were better placed to exploit new technologies in order to enhance efficiency, and to offer new instruments and combinations of services to their clients. these two trends have led to great benefits for consumers worldwide, and they are continuing. in these circumstances, canada faces a difficult policy challenge. how can we enhance our policy framework to provide greater incentives for innovation by encouraging competition while, at the same time, giving our institutions the scope to improve efficiency? this is the challenge for canadians in considering mergers, both within and across pillars, and the removal of barriers to foreign competition. the questions about the best ways to enhance competition - to balance incentives for efficiency with other legitimate public policy concerns - are complex. and i don ’ t have simple answers. but efficiency must be at the heart of the debate. because, in the end, an efficient financial system is key for the future - not just of the institutions, but of the canadian economy as a whole. financial market efficiency let me now turn to financial markets. when it comes to the competitiveness of global financial markets, size, depth, and liquidity do matter. so canadian financial markets - whether equity, fixed - income, derivatives, or foreign - exchange - have an inherent disadvantage compared with those in new york or london. to compensate, canadian financial markets have to be

aspect of the budget and its economic impact. the unified budget deficit, projected forward a certain number of years, is an important measure that is already included in the congressional budgeting process. however, the unified budget deficit does not fully capture the fiscal situation and its effect on the economy, for at least two reasons. cbo ( 2005 ), the long - term budget outlook, p. 3. i discussed this issue in ben s. bernanke ( 2006 ), " the coming demographic transition : will we treat future generations fairly? ", speech delivered before the washington economic club, washington, october 4, www. federalreserve. gov / boarddocs / speeches / 2006 / 20061004 / default. htm. first, the budget deficit by itself does not measure the quantity of resources that the government is taking from the private sector. an economy in which the government budget is balanced but in which government spending equals 20 percent of gdp is very different from one in which the government's budget is balanced but its spending is 40 percent of gdp, as the latter economy has both higher tax rates and a greater role for the government. monitoring current and prospective levels of total government outlays relative to gdp or a similar indicator would help the congress ensure that the overall size of the government relative to the economy is consistent with members'views and preferences. second, the annual budget deficit reflects only near - term financing needs and does not capture longterm fiscal imbalances. as the most difficult long - term budgetary issues are associated with the growth of entitlement spending, a comprehensive approach to budgeting would include close attention to measures of the long - term solvency of entitlement programs, such as long - horizon present values of unfunded liabilities for social security and medicare. to summarize, because of demographic changes and rising medical costs, federal expenditures for entitlement programs are projected to rise sharply over the next few decades. dealing with the resulting fiscal strains will pose difficult choices for the congress, the administration, and the american people. however, if early and meaningful action is not taken, the u. s. economy could be seriously weakened, with future generations bearing much of the cost. the decisions the congress will face will not be easy or simple, but the benefits of placing the budget on a path that is both sustainable and meets the nation's long - run needs would be substantial. thank you again for allowing me to comment on