Geithner on Reducing Systemic Risk
On June 9, Wall Street's largest broker-dealers met with the Federal Reserve Bank of New York to outline initiatives to beef up the operational infrastructure of the over-the-counter derivatives market. Earlier that day, New York Fed president and CEO Timothy Geithner called the agenda of that meeting "a bridge to a broader set of necessary changes to the regulatory framework in the U.S. and globally." Speaking at the Economic Club of New York, Geithner laid out a series of broad proposals to reduce systemic risk in the financial markets in light of the vulnerabilities exposed by the recent crisis. Focusing on three areas--regulatory policy, structure and crisis management--Geithner explained how the U.S. financial system might first be repaired and then reformed. An excerpt of his speech follows.
Since the summer of 2007, the major financial centers have experienced a very severe and complex financial crisis. The fabric of confidence that is essential to the viability of individual institutions and to market functioning in the United States and in Europe proved exceptionally fragile. Money and funding markets became severely impaired, impeding the effective transmission of U.S. monetary policy to the economy. ...
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