We rely on you to be, in effect, the front-line regulators. Increased government regulation can cause unrealistic expectations regarding the extent to which risk can be reduced by regulators. Such actions can create moral hazard and may prove counterproductive. We trust that the Basel II Capital Accord, when final, will be sensitive to these concerns.
*  *  *  The surge in risk hedging in recent years is a symptom of a much broader issue of change in both domestic and international finance that is a manifestation of changes in the real economy.