should be involved in what activities, and who should supervise the resultant organization and its component parts are genuine and important policy issues that should be debated and decided by the congress. to simply dismiss them as turf issues misses the point, i think, and chokes off that debate. conclusion in conclusion, i hope that my remarks have helped you to better understand the forces affecting our banking and financial system. equally important, i hope that i have given you a good feel for the challenges these forces have created for bank supervision, how we are meeting these challenges today, and how we may deal with them in the future. even more importantly, i hope that i have convinced you to support enthusiastically h. r. 10! in all seriousness, it really is time that we modernized our financial system and got on with the business of serving consumers and maintaining a healthy, stable, and competitive banking system.

d., pesenti p. ( 2006 ) “ would protectionism defuse global imbalances and spur economic activity? a scenario analysis ”, nbew working paper 12704, november 2006. • anglo - saxon countries which are very good at producing financial assets have already shown enormous imbalances, with us current account deficit and housing market bubbles as the headline examples ; • emergence of ( long lasting ) asset bubbles and drop in inflation ( and possibly even emergence of deflation ) are market mechanisms to bridge the asset gap ; • bursting an asset bubble makes asset shortages problem worse ; • while financial markets development moves ahead ( think about large listings in china, improving corporate governance or rapid development of credit derivatives ) it is unlikely that excess demand for assets will be eliminated soon, as it seems to have a structural origin, related to demographics ( aging ), or to higher uncertainty for corporations operating in more competitive global economy in xxi century, which probably explains why profits to gdp ratio is at 40 - years high and investments fail to recover to pre - asia - crisis and pre - dot - com - boom levels it does matter to what view of the world you subscribe, as it dramatically alters the subjective likelihood of competing scenarios for 2007. as pimco michael gomez puts it in september emerging markets note titled “ is it safe? ” 19 : “ em has historically been vulnerable to deteriorating economic and financial conditions in the united states and other developed countries. slower growth, tighter liquidity, and heightened risk aversion in mature markets generally mean lower commodity prices, less capital flows, and higher interest rates for em borrowers - conditions that helped produce some spectacular financial crises in the past dozen years. not a pretty picture, and one that begs the question of what lies around the corner “. however, if asset shortages story is correct, then upcoming us slowdown ( or brief recession according to some non - consensual forecasts ) would likely further increase excess saving ( as fading growth prospects will discourage investment projects and encourage more private saving amid rising uncertainty, only partly offset by higher public dissaving due to automatic stabilizers ), and lower valuation of us equities will make the world supply of assets even more scarce. in such situation us economy having hard times may not necessarily lead to higher risk premia for emerging markets ( as it was the case in the past ) rather any increase in risk premia would be used by investors to enhance returns, spread compression