ben s bernanke : remarks on the squam lake report – fixing the financial system speech by mr ben s bernanke, chairman of the board of governors of the federal reserve system, at the squam lake conference, new york, 16 june 2010. * * * the squam lake report – the centerpiece of this conference – is a valuable contribution to the ongoing analysis of the causes of the financial crisis and the appropriate policy responses. 1 i commend the organizers for bringing together an impressive group of scholars both to produce the report and to continue the discussion of these important policy issues at this meeting. i think we all agree on the key questions facing financial regulators : how do we strengthen the financial system and its oversight so as to minimize the risk of a replay of the recent financial crisis? and should a crisis occur, how can we limit its economic costs? the report identifies two core principles that should be among those that guide us in answering these questions. first, financial policymakers and supervisors must consider more than the safety and soundness of individual financial institutions, as important as that is ; they should also consider factors, including interactions of institutions and markets, that can affect the stability of the financial system as a whole. in the jargon of economists and regulators, supervisors need a macroprudential as well as a microprudential perspective. the second core principle put forth in the report is that the stakeholders in financial firms – including shareholders, managers, creditors, and counterparties – must bear the costs of excessive risk - taking or poor business decisions, not the public. the perception that some institutions are “ too big to fail ” – and its implication that, for those firms, profits are privatized but losses are socialized – must be ended. the federal reserve strongly agrees with both of these principles, and both have been important in shaping our views on regulatory reform. we also broadly agree with the narrative of the crisis offered in the report, which discusses, among other things, the role of subprime lending in the housing boom and bust ; the structural weaknesses in the shadow banking system, including insufficient transparency and investor overreliance on rating agencies ; inadequate risk management by many financial institutions ; and a flawed regulatory framework that allowed some large financial firms to escape strong consolidated supervision and gave no regulator the mandate or powers needed to effectively evaluate and respond to risks to the financial system as a whole. weaknesses in both the private sector and the public sector,

, having an openness to innovation, and considering policy choices that enable integration of financial technology in the banking and financial system. year - after - year, this event provides an opportunity for us to come together to engage and learn about fintech issues, keeping an eye toward the future. 1 / 3 bis - central bankers'speeches but we must recognize that the success and growth of this conference is due to the leadership and vision of president harker. for those who may not be aware, at the end of june next year, president harker will reach the federal reserve retirement requirements, and unfortunately, this will be his final fintech conference as president and ceo of the philadelphia fed. i want to congratulate pat on the creation and success of this conference, and to look forward to the ongoing and future legacy he has created for the philadelphia reserve bank with this event. president harker is, by his own admission, an " accidental economist. " he's an engineer first and, in fact, came to the field of economics through an engineering issue that required economics to solve. well, as someone who has sat at the federal open market committee conference table with president harker for the past six years, i can attest to this approach - he enlists this engineering perspective to assist in understanding economic issues. that methodical approach to issues, and his willingness to look deep under the proverbial hood, is his hallmark at the philadelphia fed. through his leadership, the bank has built strong partnerships with communities throughout the third district who know they can rely on this institution for expert knowledge and data research that are critical to working through local concerns. it was also under his leadership that the philadelphia fed's consumer finance institute took its current shape. today, the institute's multidisciplinary approach to issuesbringing together economists, industry and regulatory experts, and community development specialists - is redefining our understanding of consumer credit and payments. and, he has positioned the philadelphia fed as a true thought leader in technology and innovation, and in the application of both hard and soft data. this conference is just the most public example of this. his decision, nearly a decade ago, to give the green light to a conference specifically geared to fintech proves that president harker is clearly standing in the center of the intersection of engineering and economics. so, while i do not wish to detract from any of our speakers, panelists, and presenters today