In such situations, by design, insurance becomes more effective. Take the US as an example. Shocks are relatively similar across states, which underpins the common monetary policy. [4] But local cycles still deviate from the aggregate cycle. [5] So, both private and public insurance are in place to compensate.
In the remainder of my remarks I will comment briefly on three issues: the supervisory oversight of primary dealers, including the major investment banks; the need to strengthen the financial infrastructure; and the possible need for new tools for facilitating the orderly liquidation of a systemically important securities firm.