should always be looking for ways to make supervision more effective and less burdensome. my point today is a narrower one : that the supervisory authority of the fed has significant collateral benefits in helping it carry out its responsibilities for financial stability. in particular, the information, expertise, and powers that the fed derives from its supervisory authority enhance its ability to contribute to efforts to in both the drexel and ltcm episodes, the federal reserve initially detected the firms ’ problems through either market surveillance or its interactions with primary dealers, rather than through banking supervision. once the problems were known, considerable information came from the troubled firms themselves ( breeden, 1990 ; mcdonough, 1998 ). however, that information was supplemented, and to an extent validated, with information received from banking institutions under the federal reserve ’ s supervisory authority. in contrast, in the 1987 crash, when the crisis was not centered on a single firm but instead involved widespread concerns about securities firms ’ access to bank credit, the fed placed greater reliance on information obtained through its supervisory authority. prevent financial crises ; and, when financial stresses emerge and public action is warranted, the fed is able to respond more quickly, more effectively, and in a more informed way than would otherwise be possible. yogi berra reminded us that prediction is very hard, especially about the future. in that spirit, the federal reserve continues to work actively to prepare for the possibility of financial stress. for example, we have created cross - disciplinary teams of experts - including staff drawn from bank supervision - to monitor financial developments and to consider possible crisis scenarios and the appropriate policy responses. we have worked with other agencies both here and abroad to improve our abilities to communicate and coordinate in a crisis situation. we also continue to take measures to ensure that our communications, information systems, and policy processes will remain viable should critical infrastructure be disrupted. the federal reserve has established a strong record of promoting financial stability, and we will continue to work to ensure the vibrancy and resilience of the u. s. financial system. references bernanke, ben ( 2001 ). " comment, " in frederic mishkin, ed., prudential supervision : what works and what doesn ’ t, chicago : university of chicago press, pp. 293 - 297. _ _ _ _ _ _ _ _ _ _ ( 2006 ). " hedge funds and systemic risk, " speech delivered at the federal reserve bank of atlanta ’ s 2006 financial markets conference, sea

discussion paper no. 11, december. mcdonough, william j. ( 1998 ). statement before the committee on banking and financial services, u. s. house of representatives, october 1. mishkin, frederic ( 2000 ). " what should central banks do? ( 101 kb pdf ) " federal reserve bank of st. louis review, vol. 82 ( november / december ), pp. 1 - 14. _ _ _ _ _ _ _ _ _ _ ( 2001 ). " prudential supervision : why is it important and what are the issues? " in frederic mishkin, ed., prudential supervision : what works and what doesn ’ t, chicago : university of chicago press. peek, joe, eric s. rosengren, and geoffrey m. b. tootell ( 1999 ). " using bank supervisory data to improve macroeconomic forecasts, " federal reserve bank of boston, new england economic review, september / october, pp. 21 - 32. securities and exchange commission, division of market regulation ( 1988 ). the october 1987 market break : a report, washington : the commission, february. wall, larry and robert a. eisenbeis ( 1999 ). " financial regulatory structure and the resolution of conflicting goals, " journal of financial services research, vol. 16 ( december ), pp. 223 - 45.