immediate offing, but the forecast record of these markets is less than sterling. although the quantitative magnitude and precise timing of the wealth effect remain uncertain, the steep decline in stock prices since march 2000 has, no doubt, curbed the growth of household spending. although stock prices recently have retraced a portion of their earlier losses, the restraining effects from the net decline in equity values presumably have not, as yet, fully played out. future wealth effects will depend importantly on whether corporate earnings improve to the extent currently embedded in share prices. perhaps most central to the outlook for consumer spending will be developments in the labor market. the pace of layoffs quickened last fall, especially after september 11, and the unemployment rate rose sharply. over the past month or so, however, initial claims for unemployment insurance have declined markedly, on balance, suggesting some abatement in the rate of job loss. although this development would be welcome, the unemployment rate may well continue to rise for a time, and job losses can be expected to put something of a damper on consumer spending. however, the extent of that restraint will depend on how much of any rise in unemployment is the result of weakened demand and how much reflects strengthened productivity. in the latter case, average real incomes could rise, at least partially offsetting losses of purchasing power that stem from diminished levels of employment. finally, economic policies will have an important influence on household spending in the period ahead. no doubt, we will continue to benefit from the tendency of our tax and entitlement systems to buffer cyclical swings in income. moreover, despite the failure of congress to enact further tax cuts and spending increases, the continued phase - in of earlier reductions in taxes and the significant expansion of discretionary spending already enacted should provide noticeable short - term stimulus to demand. some of this stimulus has likely been offset by increases in long - term market interest rates, including those on home mortgages. the recent rise in these rates largely reflects the perception of improved prospects for the u. s. economy. but over the past year, some of the firmness of long - term interest rates probably is the consequence of the fall of projected budget surpluses and the implied less - rapid paydowns of treasury debt. in our conduct of monetary policy, the federal reserve responded to the weakening economy over the past year by markedly lowering our target for the federal funds rate. we accelerated the pace of rate reductions during this period in response to the accelerated pace of

have conducted their securities activities responsibly and in accordance with bank - regulatory requirements and other applicable law, including the antifraud provisions of the federal securities laws. rather, the review of the bank exception was undertaken to address a concern that, if the blanket exception for banks was retained at the same time that the barriers hindering the affiliation of banks and securities broker - dealers were removed, securities firms might acquire a bank and move the securities activities of the broker - dealer into the bank in order to avoid sec supervision and regulation. some parties also expressed concern that banks might in the future significantly expand their securities activities outside the services traditionally provided customers under the blanket exception. the congress sought to balance these concerns with the desire to ensure that banks could continue to provide their customers the securities services that they had traditionally provided as part of their customary banking activities, without significant problems, and subject to the effective supervision and regulation of the banking agencies. the end result, the glb act, replaced the blanket exception for banks from the definitions of " broker " and " dealer " with fifteen exceptions tailored to allow the continuation of key bank securities activities. these exceptions were broadly drafted and were intended to ensure that banks could continue to provide their customers with most, if not all, of the services that they traditionally had received from banks. for example, these statutory exceptions permit banks, subject to certain conditions, to continue to ( 1 ) buy and sell securities for their trust and fiduciary customers, ( 2 ) buy and sell securities for their custodial clients as part of their customary banking activities, ( 3 ) establish so - called " networking " arrangements with registered broker - dealers to offer securities services to the bank's customers, ( 4 ) sweep deposit funds into shares of no - load money market mutual funds, ( 5 ) privately place securities with sophisticated investors, ( 6 ) issue and sell to qualified investors securities that are backed by assets predominantly originated by the bank, its affiliates or, in the case of consumerrelated receivables, a syndicate formed by the bank and other banks, and ( 7 ) broker securities in up to 500 transactions per year that are not otherwise exempt. interim final rules adopted by the sec the interim final rules as currently written are, in many respects, not consistent with the language or purposes of the glb act and would impose unnecessary costs and burdens on banks and their customers. in the interest of time, i will focus only on some of our most significant