experience, and judgment of the people who have to apply those models. being able to judge which structural model best describes the forces driving asset pricing in any particular period is itself priceless. to paraphrase my former colleague, jerry corrigan, the advent of sophisticated risk models has not made people with gray hair, or none, wholly obsolete. more fundamentally, technology may be affecting the underlying economics of financial intermediation. one of the profound effects of technology on financial services is that the increasing availability of accurate and relevant real - time information, by reducing uncertainty, reduces the cost of capital. that is to say, the cost of capital is lower for both lenders and borrowers and for banks in their role as both. it is important to a bank as a borrower because funding costs are critically tied to the perceived level of uncertainty surrounding the institution ’ s condition. it is important in the role of lender because a decline in uncertainty resulting from a substantial increase in real - time information implies a reduction in what might be called “ knowledge float ” - the ability to maintain proprietary information and earn a rate of return from that information with no cost. as you know, financial intermediaries historically have been successful not only because they diversified to manage risk but also because they possessed information that others did not have. this asymmetry of information was capitalized at a fairly significant rate. but that advantage now is rapidly dissipating. we are going to real - time systems, not only with transactions but with knowledge as well. financial institutions can respond to this disappearing advantage by endeavoring to preserve the old way of doing business - by keeping information, especially adverse information, away from the funders of their liabilities. but that, i submit, is a foolish policy that buys a dubious short - term gain with a substantial long - term cost. moreover, inevitably and increasingly it will become more difficult to do. whenever it becomes clear that the information coming out of an institution is somehow questionable, that institution will pay an uncertainty premium. conversely, when companies write off errors, their stock prices almost invariably rise. the reason is the removal of uncertainty and the elimination of a shadow on the company ’ s credibility. what does all this mean for financial supervision and regulation? if the supervisory system is to remain effective in fostering the safety and soundness of the country ’ s financial system, it must adjust to the changing structure of that system. when wearing our supervisory hat at the federal reserve,

ben s bernanke : ceremonial swearing - in remarks by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the ceremonial swearing - in by president bush, federal reserve board of governors, washington, dc, 6 february 2006. * * * good morning. i would like to begin by thanking president bush for the confidence he has placed in me and for attending this ceremony. today marks only the third visit of a president to the federal reserve. franklin d. roosevelt dedicated this building in 1937 and gerald r. ford visited in 1975. mr. president, you do us a great honor. members of the president's economic team and the heads of the federal financial regulatory agencies have also joined us this morning. i have greatly enjoyed collaborating with many of you during my time in washington, and i look forward to working with you in the future. thank you for coming. i would like to extend a special welcome to members of congress. the federal reserve was created by congress in 1913 and entrusted with the power, granted originally to the congress by the u. s. constitution, to coin money and regulate the value thereof. accordingly, it is incumbent on the federal reserve to report regularly to, and work closely with, the congress. i look forward to a strong and constructive relationship with members of both the house and senate. former chairmen paul volcker and alan greenspan also honor us with their attendance. their leadership and insight have contributed immeasurably to the strength and stability of our economy. the nation and the world owe a debt of gratitude to these two great americans. that these distinguished guests have chosen to join us today is a testament to the centrality of this institution to the nation's economic life. our mission, as set forth by the congress, is a critical one : to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all americans well and fairly. in his remarks in this building in 1937, president roosevelt described as our purpose " to gain for all of our people the greatest attainable measure of economic well - being, the largest degree of economic security and stability. " as i contemplate taking up the challenge of leading an institution with such weighty responsibilities, i count, first, on the love and support of my family : my wife anna, son joel, and daughter alyssa, who are here today. i know also that i