As federal policy has evolved, its role has shifted from being the sole source of funding through direct appropriation to providing tax incentives and credit enhancements that encourage private investment by offsetting risk. The federal government also plays an important role in creating incentives for private investment, encouraging innovation, and protecting consumers.
These changes, which provide the same or better service to clients at lower cost, are certainly innovations in the usual sense of the word, and we have little concern for their welfare effects. BIS central bankers’ speeches  1  What we worry about are those changes that are more often associated with the so-called “rocket science” side of banking. Take derivatives for example.