One thing I would say if you do do it, you better have a mechanism in place to make sure that those large securities firms that are left actually are well-regulated, well-capitalized, have enough liquidity, and have access to a lender of last-resort. One of the problems that we had in the financial crisis is there wasn’t a good method to lend to securities firms. By law, the Federal Reserve discount window – this is the facility that we have open to commercial banks – were not allowed to have that discount window open to securities firms. So, in the crisis, we had to do extraordinary lending activities to securities firms. We need a better lender of last resort backstop for securities firms. If you decide to repeal Glass-Steagall and separate commercial banks from securities firms, that’s not something that I would recommend, but if you were to do that, make sure you have a way of backstopping the securities industry, too, so if a big securities firm gets in trouble it doesn’t threaten the entire financial system. Dr. Olajide Oladipo: Thank you. I’ll be expecting questions from students, too. Audience Member: Not a student. President Dudley:  9 / 15  BIS central bankers' speeches  But you’re a student of something, right? Audience Member: My concern is MWBEs. I feel that the racist element within our capitalization has not allowed us to participate in the economy on an equal level by having access to capital. The government’s asking for 30% on major projects.
And recently, it was reported that North Korea was able to illegally transfer monies from a Bangladesh account at the Fed to an account at the Philippines. What’s being done to protect funds that are held not only at the Fed but also at other financial institutions? President Dudley: Well, that’s a good question. Cybersecurity is a really important activity for us at the Fed. We want to make sure that not only is the Federal Reserve well-protected but also the banks that we supervise are also well-protected against cyber-risk. This is a particularly hard risk to evaluate on any given day because we’re trying to improve our defenses, but the bad guys are also improving their capabilities. So, we do a lot of different activities within the bank to make sure that we’re secure from a cyber-perspective. For example, we phish our employees, and we send them emails that sort of suggest that if you’ll click on this, and if you click on this you get a message from our Information Technology Department that you’ve been phished and you learn that you have to be a lot more careful about what you actually click on. That’s important because a threat can both come from outside, but it can also come from within. The other thing we’ve done is we’re spending a lot of time internationally to try to make the financial system safer by making sure that the payment executer, their systems are secure.