at high rates with little or no down payment and non - existent underwriting is not something we want to see again, for both consumer protection and financial stability reasons. likewise, a business model for credit cards based upon low interest rates and high, frequent penalty fees seems at odds with responsible allocation and use of credit. but what of securitization? there were undoubtedly many imprudent, even reckless, practices associated with the securitization process, particularly with respect to some exotic instruments whose risk could not be understood even by their creators. there is little to lament in their disappearance. but securitization is not in and of itself a bad thing. on the contrary, a well - functioning system for securitizing well - underwritten loans can make capital available at lower cost to businesses, homeowners, and retail consumers. the failure of many relatively straightforward securitization markets to revive without government support may be explained simply as a hangover from the excesses and still - encumbered assets of the pre - crisis period. just as some have restarted, perhaps others will follow as markets for the underlying assets improve. but i will confess to some concern that there has not already been greater activity. beyond specific financial instruments, there are clearly fundamental behavioral and macroeconomic adjustments in the offing. the habit of building personal savings predominantly through appreciation of one's home is one that many americans will have to change. similarly, the growth models of emerging market countries dependent on unshakeable american consumption and ever - increasing borrowing will not be sustainable even as recovery becomes more established. and, needless to say, major fiscal reform here at home will very likely be the central issue of u. s. economic policy in the years following recovery from the present crisis. conclusion my focus today on what follows in the wake of the crisis might itself be read as a touch of optimism, signifying that the crisis itself looks to be over. the sobering counterpoint is my argument that some rather substantial adjustments will be needed by individuals, financial firms, businesses, regulators, and nations. that there will be adjustments is not something we can choose. how deftly we adjust is the question whose answer will weigh heavily in our nation's economic performance over the next decade.

##s yields over the yields on comparable treasury securities to rise sharply. together with the increased fees imposed by the gses, the rise in this spread resulted in higher interest rates on conforming mortgages. more recently, agency mbs spreads and conforming mortgage rates have retraced part of this increase, and conforming mortgages continue to be readily available to households. however, for the most part, the nonconforming segment of the mortgage market continues to function poorly. in corporate debt markets, yields and spreads on both investment - grade and speculativegrade corporate bonds rose through mid - march before falling more recently. issuance of investment - grade bonds by both financial and nonfinancial corporations has been quite robust so far this year, but issuance of new high - yield debt has stalled. strains continue to be evident in the commercial paper market as well, where risk spreads remain elevated and the quantity of commercial paper outstanding, particularly asset - backed paper, has decreased. commercial and industrial loans at banks grew in january and february, but at a considerably slower pace than in previous months. these developments in financial markets – which themselves reflect, in part, greater concerns about housing and the economic outlook more generally – have weighed on real economic activity. notably, in the housing market, sales of both new and existing homes have generally continued weak, partly as a result of the reduced availability of mortgage credit, and home prices have continued to fall. 1 starts of new single - family homes declined an additional 7 percent in february, bringing the cumulative decline since the early 2006 peak in single - family starts to more than 60 percent. residential construction is likely to contract somewhat further in coming quarters as builders try to reduce their high inventories of unsold new homes. private payroll employment fell 101, 000 in february, after two months of smaller job losses, with job cuts in construction and closely related industries accounting for a significant share of the decline. but the demand for labor has also moderated recently in other industries, such as business services and retail trade, and manufacturing employment has continued on its downward trend. meanwhile, claims for unemployment insurance have risen somewhat on balance, and surveys indicate that employers have scaled back hiring plans and that jobseekers are experiencing greater difficulties finding work. the unemployment rate edged down in february and remains at a relatively low level ; however, in light of the sluggishness of economic activity and other indicators of a softer labor market, i expect it to move somewhat higher in coming