For the Federal Reserve, adding a more explicit financial stability mandate to its existing dual mandate for price stability and economic growth raises important and difficult questions about the compatibility of these responsibilities and the problems that might arise in attempting to achieve them all simultaneously.
Let me begin my remarks by examining more closely what is meant by “financial stability” and the Federal Reserve’s current role in maintaining financial stability. Then I will look at the changing structure of the financial system, how the Federal Reserve has responded to the current crisis and the issues surrounding the possible extension of the Federal Reserve’s responsibilities.