Second, the conflict between the interests of the firms, acting on behalf of their shareholders, and those of the broader public became particularly acute once the crisis got underway, because of the debt overhang  2  For a fuller discussion of both the potential and limits of time-varying regulation, see Daniel K. Tarullo (2013), “Macroprudential Regulation,” speech delivered at the Yale Law School Conference on Challenges in Global Financial Services, New Haven, Conn., September 20.
3  To be clear: Taking account of financial-stability considerations when formulating monetary policy can be fully consistent with the dual-mandate objectives of fostering full employment and price stability. Consider a traditional setting where the policymaker has a quadratic loss function over deviations of unemployment and inflation from their target levels.