investment in underserved areas. a number of methods have been derived for evaluating the effectiveness of community development projects. the one with which i am most familiar, through my work on the board of neighborworks america, is the success measures data system. this system uses more than forty indicators and a variety of data - collection tools - - including surveys, interviews, and focus groups - - to quantify the effects of housing, economic development, and community building programs at the personal, organizational, and community levels. this array of tools allows neighborworks to measure success not just quantitatively but qualitatively, looking beyond the numbers to detect sustainable positive change. the underlying philosophy is that a community development initiative cannot be judged successful just because it puts a family in a home ; rather, it must be able to say that, by doing so, it has improved the community, the family ’ s quality of life, and the family ’ s economic potential. these data are also useful to corporate partners insofar as they demonstrate business performance against internal goals and commitment to the community. businesses recognize that demonstrable success enhances their reputation, increases brand recognition, and improves their ability to compete successfully for future partnership opportunities. thus, being able to determine the return on a business ’ investment in a community development initiative in both quantitative and qualitative terms is the next logical step in attracting further private investment. but the social and economic needs of our inner - city neighborhoods extend beyond business investment. effective partnerships with local officials and community leaders are another key element of the revitalization process. at the state and local levels, public officials contribute to the attractiveness of investment conditions by maintaining sound fiscal policies. these policies allow local officials to take the lead from social compact and begin to market local neighborhoods using the analysis that demonstrates the buying - power residing within these more challenging neighborhoods. their willingness to address other neighborhood needs, such as housing, infrastructure, education, health care, and other social supports will also be important to investors. in general, when community development is a cooperative effort, it can lead to more sustainable outcomes along both economic and social dimensions. while the return on investment can be a sufficient gauge of their economic success, success in broader terms can be viewed by assessing the commitment of all segments of the community to the goal of revitalization. moreover, the benefits of such cooperative actions are not always readily measurable in dollars and cents. greater opportunities in local neighborhoods evidence themselves through better schools and stronger

line with fundamentals today, may not be tomorrow. because they cannot rule out the chance that some asset prices might correct more than anticipated, policymakers must consider how the economy might withstand such a correction. corrections in interest rates and asset values may have the most potential for disruption when they impair the financial health of borrowers and lenders and thereby cause them to pull back even further than might be warranted by the change in rates or prices. in that regard, we have some reason to be optimistic that the players are well positioned to absorb these adjustments. we have already discussed the reasons for confidence that household borrowers will be able to meet their obligations. lenders, too, appear well positioned to weather any such adjustments. commercial banks remain highly profitable and well capitalized, and other financial intermediaries show few signs of widespread problems. i am encouraged by the way our financial system came through the very difficult circumstances of the last few years, including the plunge in equity values, the recession, the subsequent period of slow growth, and the spike in credit problems. to be sure, pockets of difficulty emerged, and lenders became more cautious, but, for the most part, credit continued to flow, and problems remained isolated, not systemic. our increasingly sophisticated financial market was able to effectively distribute risk so that lenders were sufficiently diversified to survive some quite stressful developments. in addition, financial markets have important automatic - stabilizer properties. if investors sense that asset - price adjustments are undermining the expansion, interest rates will fall back because investors will anticipate a lower trajectory for the federal funds rate. for its part, the federal reserve will adapt its monetary policy to unexpected developments in an effort to keep the economy on track toward high employment and stable prices. implications for the current policy setting that brings me to what i see as the implications of this analysis for the federal reserve ’ s current monetary policy of keeping the federal funds rate low and being patient in removing policy accommodation. i hope that the discussion has cast some doubt on the argument that this policy is generating substantial imbalances in the economy. i am not disputing the argument that current policy has contributed to higher asset prices, more household indebtedness, and strong activity in interest - sensitive sectors such as housing. but i am questioning the apparently firm conclusion of some that these developments represent distortions or imbalances that are likely to correct in an abrupt and harmful manner. at the very minimum, one cannot reach