My response is that you do not need to see the words “financial stability” in the Federal Reserve Act for that to be a key part of our mandate. The Federal Reserve’s financial stability mandate is seen in the penumbra of the Federal Reserve Act, and that is legally sufficient. Without trying to cover this important topic exhaustively as in a formal legal opinion or a brief filed with a court, let me outline here the essence of the analysis. The starting point in every discussion of the Federal Reserve’s mandate is Section 2A of the Federal Reserve Act, known to many as the dual mandate. It directs the Federal Reserve “to promote effectively the goals of maximum employment, stable prices, and moderate longterm interest rates.”3 While there are actually three discrete objectives in the dual mandate, most economists would say that moderate long-term interest rates are a tool to produce maximum employment and price stability. Such economic reasoning also involves some clever and simple arithmetic – it reduces a tripartite mandate to a dual mandate. With respect to financial stability, leading economic thinkers would now say, and the financial crisis seems to offer us the perfect illustration, that price stability and maximum employment are possible only in a context of financial stability.
It also involves patrolling the frontiers of our powers and  6  Id. at 483. 7  Dodd Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111–203, 124 Stat. 1376 (2010). 8  12 U.S.C. § 5365. 9  12 U.S.C. § 5365(a)(1). 10  12 U.S.C. § 1842 (c)(7). 11  Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System, September 18, 2013, Press Conference. BIS central bankers’ speeches  3  recognizing where and when the rule of law forecloses options. This is essential to the credibility of the central bank, a concept closely connected with the public’s trust. To conclude, I hope these remarks about financial stability also reflect on what our legal colleagues have accomplished at the ECB. In this regard, I pay tribute to the leadership of Antonio Sáinz de Vicuña, and to his work not only in presiding at the birth of the euro, but guiding the ECB to take the extraordinary actions necessary to preserve the euro. As President Draghi accurately forecast, they have been enough. Antonio, as you step down as general counsel, I congratulate you on the accomplishment of the mission, and applaud you for a job well done. Thank you, ladies and gentlemen, for your kind attention. Disclaimer: The views expressed are the views of the author and do not necessarily reflect the views of the Federal Reserve Bank of New York, or any component of the Federal Reserve System. 4  BIS central bankers’ speeches