New York Insurance

Hello, chairman Dodd, a member of classification, Shelby, and the other Committee members. Thank you for giving me the opportunity to present to you today. I am here to support the action of the Federal Reserve Bank of New York in response to the current challenges of financial markets, including those relating to the proposed merger of Bear Steams, and JPMorgan Chase.

On the evening of Thursday, March 13, 2008, I attended a conference call with representatives of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve, and the Department of the Treasury. On this requirement, the SEC has informed the staff that we take note of Bear Steams’ financial resources were insufficient to meet its commitments and society, it was necessary to conclude that protection would have gone bankrupt in the morning. The SEC concluded, and she said this ruling, and he would spend the evening discussing Bear, what kind of declaration of bankruptcy is reasonable.

The conference call was held tonight in the context of an extremely difficult period in the U.S. financial system. This relationship has been of crucial importance to the decisions we have in the coming days. And I think it is important to start with a presentation of the broad guidelines of risk to the economy, the crisis in the financial system now.

The intensity of the crisis that we now have in the United States and world financial markets is a function of the size and nature of the financial boom that has preceded it. It was a time of financial performance for innovation - particularly in the credit risk instruments such as, for example, credit and derivatives and structured products. There have been significant leverage effects on growth, increased dependence of the Credit Ratings in structured products and a sharp deterioration in the underwriting standards.

Innovation in the area of financial services, products has been accompanied by a dramatic increase in the level of financial intermediation outside the Core Banking System. The importance of securities broker-dealers, hedge funds and investment funds in the financial system has made steady progress. Off-Balance-Sheet vehicles of various forms of broadcasting and the increase in concentration over the fortune of values were used in the financing of vehicles, with significant risks of liquidity.

The deterioration in the real estate market in the United States at the end of the lower end of the summer of 2007, a sharp increase in uncertainty about the value of assets or securities structured. The application of these assets and securitization dramatically by contract, the market for mortgages and other loans assets no longer function. This increases the pressure to fund a mixture of various financial institutions. The uncertainty on the extent and the amount of losses for financial institutions filled with concerns about credit risk vis-à-vis exposure to these institutions.

Part of the dynamics in the workplace was that the banks had to, financing or acquisition - assets in a number of investments structured and financed by lines Asset-Backed Commercial Paper. Given that some investors trying their operations in the liquidation of these assets, most of the traditional suppliers of unprecedented funding from the bank withdrew its counter-parties in the hope that the potential gains of the money on their own investors.

Market participants funding of the concept of preparedness guarantees high quality has declined dramatically. Accordingly, the costs of the concept of free financing premature, and has increased the volume shrunk. Banks were on Financing for short periods. In terms of financial markets without deteriorate, the premium of cash, negotiable instruments - such as securities for cash - has increased significantly.

Even with the tragic consequences of the actions of the Federal Reserve and other central banks to liquidity pressure, tension in the financial markets. In many ways far more poor living conditions in February and March. The credit spreads financial institutions increases, share prices fell, and the proper functioning of the market sharply deteriorated. The first part of March, the risk of uncontrolled growth of adaptation.

What we observed were the United States and world financial markets was comparable to the classical model in financial crises. Asset lower prices - triggered by concerns about the prospects for economic performance - has led to a reduction in the willingness to take risks and margin call. In require borrowers to sell assets, debts, some highly leveraged companies were unable to meet their obligations and counter parties launching the liquidation of assets. This has the pressure on asset prices and greater volatility. Merchants higher margins that compensate for the increased volatility and lower liquidity. That, more pressures on other leveraged investors. Increased self-rising spiral of discounts forced auction, lower prices, greater volatility, and even lower prices.

This dynamic raises a number of risks to the effective functioning of the financial system. It reduces the effectiveness of monetary policy, given that the widening of spreads of hazard and has worked to offset the decline in the Fed funds rate. Gion Contamines widespread transmission of distress signals to other markets waves, Subprime on prime-time mortgages, and even agency mortgage securities, Commercial Mortgage-Backed Securities, and corporate bonds and loans. In the current situation, the impact has been in the Common Market, and student loans.

The biggest systemic risk is: If this momentum is intact, the result would be a greater likelihood of insolvency widespread, and the persistence of serious damage to the financial situation, and for the economy as a whole . This is not a theoretical risk, and this is not something that the market can solve its own roster. It runs the risk to extensive damage to economic activity. Absent an aggressive policy of the reaction, the consequences would be for lower-income families to work, an increase in borrowing costs for housing, education and the cost of daily life, the decline in value of the retirement benefits and rising unemployment.