«I expect that the evolution of the financial system in response to global
economic forces, technology, and, yes, regulation will result sooner or later in the all - too - familiar risks of
excessive optimism, leverage, and maturity transformation reemerging in new ways that require policy responses.»
That's why central banks like the Fed act to smooth out these
economic cycles by lowering interest rates when times are tough (boosting investment through cheap credit) and raising them when growth picks up again (curbing
excessive optimism by making credit more expensive).