ࡱ> 02/[ R\bjbj2ΐΐM -----AAA8y Aegggggg$2----T%%%d--e%e%%%=AQv%Q0%^%-%,%% : VEFURYf[b ZSŖog YNыz[ ыIlSe To begin with an obvious point, much of the past year has been deeply humbling for my industry. We held ourselves up as the experts, and the loss of public confidence from failing to live up to the expectations that we created will take years to rebuild. Worse, decisions on compensation and other actions taken and not taken, particularly at banks that rapidly lost a lot of shareholder value, look self-serving and greedy in hindsight. Financial institutions have an obligation to the broader financial system. We depend on a healthy, well-functioning system, but we collectively neglected to raise enough questions about whether some of the trends and practices that became commonplace really served the publics long-term interests. Meaningful change and effective reform are vital and should naturally emanate from the lessons learned. I will discuss a few of the more important lessons from this crisis. Id also like to highlight some of the regulatory guideposts that may help us to improve the broader systemic management of risk, increase the level of institutional accountability and enhance investor confidence. Without trying to shed one bit of our industrys accountability, we would also further our collective interests by recognizing other contributing causes to the severity of the cycle we are living through. As a matter of policy, we allowed housing prices to be subsidized, including through implied government support of Fannie Mae and Freddie Mac. We watched as high consumption and low savings rates as well as entitlement spending were increasingly encouraged and financed through the twin deficits. Factors from both Main Street and Wall Street contributed to todays circumstances. Neither part of our economy acted completely independent of the other. So, any examination of how we got to this point must begin with an understanding of some of the global economic and financial dynamics of the last two decades. Certainly, what started in a localized part of the U.S. mortgage market spread to virtually every corner of the global financial markets. But the genesis of the problem wasnt in sub-prime. Instead, the roots of the damage to our financial system are broad and deep. They coalesced over many years to create a sustained period of cheap credit and excess liquidity. The resulting under-pricing of risk led to massive leverage across wide swaths of the economy from households to the corporate sector to the public sector. I see at least three broad underlying factors: First, there has been enormous growth in the amount of foreign capital, much of it held in large pools, and a very significant shift in the balance of payments of many emerging markets; Second, and linked to this, nearly ten years of low long-term interest rates; and "$4m n NOxy6>MNOQ鼤ombZVhyjhyUh @hyCJaJU5 *h YhyB*CJPJaJfHphq 2h @h @B*CJPJaJfHphq /h YB*CJPJaJfHo(phq 2h @hyB*CJPJaJfHphq %hl&5OJPJfHo(q +h @h @5OJPJfHo(q !(4 OyNPQSTVWYZ[\gd @ d\WD`gd @gd @Third, the official policy of subsidizing homeownership in the United States.     QRTUWX[\h @hyCJaJhyjhyU0182P. A!"#$%S b 666666666vvvvvvvvv6666>6666666666666666666666666666666666666666666666666hH666666666666666666666666666666666666666666666666666666666666666666668 0@P`p6888 0@P`p 0@P`p 0@P`p 0@P`p 0@P`p 0@P`p8XV~PJ_HmH nHsH tHF`F cke $1$a$CJKH_HmH nHsH tH$A $ ؞k=W[SONiN 0nfh@L  @h$<@&a$5CJ OJQJ\^JaJ D/AD  @h Char5CJ KHOJQJ\^JaJ PK![Content_Types].xmlj0Eжr(΢Iw},-j4 wP-t#bΙ{UTU^hd}㨫)*1P' ^W0)T9<l#$yi};~@(Hu* Dנz/0ǰ $ X3aZ,D0j~3߶b~i>3\`?/[G\!-Rk.sԻ..a濭?PK!֧6 _rels/.relsj0 }Q%v/C/}(h"O = C?hv=Ʌ%[xp{۵_Pѣ<1H0ORBdJE4b$q_6LR7`0̞O,En7Lib/SeеPK!kytheme/theme/themeManager.xml M @}w7c(EbˮCAǠҟ7՛K Y, e.|,H,lxɴIsQ}#Ր ֵ+!,^$j=GW)E+& 8PK!mQtheme/theme/theme1.xmlYMoE#F{oc'vGuرhF[x=ޝzvg53NjHHzZ $ʯI)*E_N&IA!>Ǽ3xN>UWL0Č߫߿z}rx{h9T8T/χ?xY'~3S~O_|w)ӈHt=a+d NG1-RlƁ1RJwT蠯M1K"o he˓ێ½PL-|%EhY7'qP.\L=dqķ3Iofi.ñBRb-JP_pG ݢiKtdӌhFio7;7Q2ȾD>a/Q>XW ˔M_uHq)h +:Viw4rBqϫ"r!2laCbU|!8^8>ܠ,AбVt׎~ls14_=,ɬožTV G"ѦbH'.4x޵w-ϷE|F;v`b3"G 'e\fHO '$i_wp >*8i&LY%\,xҕ= r6f 3Tʅ):ªZKLs&C Mܛ0 [˫p@ע`j۽7 YHxHicT5Ar@HZAZC}i' RQ\m,zo,gQu{Y\,Nר/=L _.̇Y7C6-fSh62"5NHT[X65̫4X%Yֳ2fkhi~tCKF#b +w1m|4`!:U!p5a:~{4mmio ήc8mDJpSǹ橠V1?#Si?3E'pS2W`qB]( 08w nA[s)k8= Aa?R dڒɾcUӽ˲d)#Queb}C!&i0>4S7{z F} 4sKvUKoȳh~1jYUVH5U8Vk;֜L9ŰD ?*|FL "A3>g]dm2iVֵ褽mg [  Q\ \ f  S s>@ 0(  < C  ?H0(  M M O O P P R S U V X Y \ 6> L M M O O P P R S U V X Y \ 333M M O O P P R S U V X Y \ y Y @l&lM O @//h //( [ PP@P0@UnknownG* Times New Roman5Symbol3. * Arial;ўSOSimHeiOlucida GrandeLatha;[SOSimSun7K@CambriaA BCambria Math Qhr:gUu:gh  !Z&!),.:;?]}    & 6"0000 0 0 00000 =@\]^([{  0 0 00000;[H H 3Q)?l2!xxTo begin with an obvious point, much of the past year has been deeply humbling for my industry. We held ourselves up as the experts, and the loss of public confidence from failing to live up to the expectations that we created will take years to rebuild.user4TsOh+'0d   , 8DLT\To begin with an obvious point, much of the past year has been deeply humbling for my industry. We held ourselves up as the experts, and the loss of public confidence from failing to live up to the expectations that we created will take years to rebuild.userNormal3Microsoft Office Word@pT@0D&@* ՜.+,D՜.+,|8   (0H  ` ?GKSOProductBuildVer2052-9.1.0.5132  !"#$%&()*+,-.1Root Entry F|=31TableWordDocument2SummaryInformation(DocumentSummaryInformation8'CompObju  F#Microsoft Office Word 97-2003 ĵ MSWordDocWord.Document.89q