With both commercial and residential rents, not to mention sales prices, high and rising in Manhattan, northern New Jersey has an opportunity to capitalize on its widening cost advantage by attracting companies and residents that value an urban location, but find New York City to be too pricey. And if preferences are indeed in the midst of a long-term shift toward urbanization, this bodes particularly well for New Jersey’s own cities. With a major international airport and seaport, a 20–30 minute train ride from most of Manhattan – but much cheaper rents – as well as a number of universities and a solid infrastructure, Newark has strong potential to develop its prominence as a major local business, economic and cultural hub. Concluding thoughts To conclude, I would like to say a few words concerning proposals to reform the Federal Reserve System. First, I concur with Chair Yellen that the Federal Reserve already is very transparent and accountable to Congress and to the public. I share her strong belief that the independence of the central bank to make appropriate policy decisions consistent with its legislated mandates is essential to a nation’s economic well-being. With regard to the structure of the Federal Reserve System and the role of the regional banks, including the New York Fed, I also agree with Chair Yellen that the system is working well, and I do not see a need for any substantive changes. I believe that the System has been designed appropriately so that a wide range of regional views are represented.
For the effectiveness of such interventions, however, there needs to be clarity in the objectives to be achieved by such central bank presence and the results that are expected to be delivered. Of importance, there needs to be the recognition of the temporary nature of such interventions and the challenge of efficiently unwinding such presence when the objectives are achieved. There is also the need to manage the risks of unintended  2  BIS Review 155/2010  consequences of such direct central bank interventions. Such risks could include the potential for circumvention, or the gravitation to other markets not protected by such intervention. There could also be potential costs associated with such interventions, not only the current costs, but also the cost to future generations. While the pace of deregulation and liberalisation may differ across emerging economies, there is a discernable distinct shift to greater market orientation in this recent decade. These reform efforts have been reinforced by efforts to develop the financial markets and financial infrastructure. Within this framework, the nature of intervention has been in the form of direct presence in the financial markets, the setting of rules and regulation, and in the resolution of problem financial institutions. Such interventions were evident during the Asian financial crisis in the late 1990s to restore stability in the financial markets. This in turn created conditions for the resumption of the financial intermediation process.