In fact, I think it is safe to say that few of us in the convention hall three years ago envisioned the financial and economic environment we now confront. Envisioning the conditions we will face three years from now is equally difficult, but it is my hope and expectation that those conditions will be significantly brighter.
The second type of risk that I consider central to the understanding of financial stability is what I call macroeconomic risk – that is, an increase in the probability that a financial disruption will cause significant deterioration in the real economy.