to include trust preferred stock in tier 1 capital came only with stricter quantitative standards that apply to a range of noncommon equity capital elements. in our view, the continued inclusion of trust preferred securities in tier 1 capital is merited because our experience has shown that this instrument can provide financial support to banking organizations if their financial condition deteriorates. also, from a competitive point of view, poolings of trust preferred stock have enabled smaller bhcs to enter the capital markets for tier 1 capital, which larger bhcs have long been able to access. a recent innovation that banking organizations have been considering is a modified trust preferred security that continues to receive tier 1 capital treatment but is given increased equity credit from the rating agencies. although the federal reserve is working with institutions on possible modifications to conventional trust preferred securities that meet this objective, our focus is on ensuring that the instruments continue to provide capital strength and do not give rise to supervisory problems. our experience with conventional trust preferred securities has been largely positive, and we hope to maintain that track record with any modified trust preferred securities we eventually approve. thus, while we are cognizant that a large volume of trust preferred securities will begin to become callable at the end of this year, making institutions especially keen to find a replacement security with higher rating - agency equity credit, we intend to move judiciously in approving modifications. as always, we will do our best to respond to the business needs of the banking organizations we supervise in a timely manner and to accommodate them to the extent possible within the bounds of our prudential framework. changes to the small bank holding company policy statement finally, knowing that many of you represent smaller banks, i want to highlight a recent change in the federal reserve's small bank holding company policy statement. that statement was originally issued in 1980 to facilitate the transfer of ownership of small community - based banks in a safe and sound manner. it permits the formation and expansion of small bank holding companies ( bhcs ) that have debt levels higher than would be permitted for larger bhcs. the statement previously applied to those bhcs ( qualifying small bhcs ) that had pro forma consolidated assets of less than $ 150 million and met certain qualitative criteria. the federal reserve follows the general principle that bank holding companies should be a source of strength for their subsidiary banks. when a bank holding company incurs debt and relies on the earnings of its subsidiary banks to repay the debt, the

that market incentives had been reduced and that we were losing the dividend of efficient uses of resources that such incentives provide. even those observers who derided the more unbridled forms of capitalism became increasingly aware that attempts to tame the market could be costly in terms of economic growth and the average living standards of a nation. over the past thirty years, as many countries have struggled to liberalize their economies and improve the quality of their policies, global per capita income has steadily risen. i recognize that poverty rates are notoriously hard to quantify, but according to a recent study, the share of the world's population living on less than $ 1 per day, a commonly used poverty threshold, has fallen dramatically over the past three decades - - from 17 percent in 1970 to 7 percent in 1998, representing a decline of 200 million people. in addition since 1970, the infant mortality rate has declined by more than half, school enrollment rates have risen steadily over the past thirty years, and literacy rates are up. smith ( 1776 ), vol ii, book iv, chapter v, p 43. world bank ( 2002 ) - - gdp per capita ( constant 1995 dollars ). sala - i - martin ( 2002 ). the $ 1 per day threshold is measured in 1985 dollars on a purchasing power parity basis. world bank ( 2002 ). while, from a global perspective, wealth and the overall quality of life have risen, that success has not been evenly distributed across regions or countries. the economies of east asia are often - repeated success stories. some, including china, malaysia, south korea, and thailand, stand out not only as growing very strongly, but also as having seen the greatest declines in poverty rates. overall, over the past three decades, asia's $ 1 per day poverty rate fell by one measure from 22 percent in 1970 to just 2 percent in 1998. moreover, asia was not alone. per capita incomes in latin america also expanded during the period, and poverty rates fell, although progress was somewhat slower. but, sadly, the story in africa has been quite different. levels of per capita income in that continent have actually fallen. the poverty rate, which in 1970 matched the rate in asia at the time, is estimated to have doubled to 40 percent by 1998. while africa's performance has clearly been subpar, some african countries have had some success. for example, botswana, lesotho, and more recently uganda have made some progress in raising per capita income