can undermine market discipline and liquidity can falter unexpectedly. . . . [L]iquidity is significantly higher than it would otherwise be due to the proliferation of financial products and innovation by financial providers. This extraordinary growth itself is made possible by remarkable improvements in risk-management techniques. Hewing to my proposed definition, we could equally state that financial innovation has been made possible by high levels of confidence in the strength and integrity of our financial infrastructure, markets and laws. Moreover, remarkable competition among commercial banks, securities firms and other credit intermediaries have helped expand access to—and lower the all-in-cost of—credit. Interest rate risk and credit risk exposures are now more diversified. Look no further than dramatic growth of the derivatives markets. In just the past four years, notional amounts outstanding of interest rate swaps and options tripled, and outstanding credit default swaps surged more than ten-fold. These products allow investors to hedge and unwind positions easily without having to transact in cash markets, expanding the participant pool. Syndication and securitization also lead to greater risk distribution. Commercial and industrial (C&I) lending potential has expanded with the adoption of syndication practices, allowing credit risks to be spread across a greater number of participating banks and non-bank lenders. Perhaps an even more significant support for the expansion of C&I loans is the rapid growth of collateralized loan obligations (CLOs)-special purpose entities that buy C&I loans with funds raised from investors seeking different risk exposures. CLOs allow loans to be financed primarily with high-rated debt securities issued to institutions like mutual funds, pension funds, and insurance companies. Indeed, in recent years, the share of syndicated C&I term loans funded by institutional investors is estimated to have exceed that funded by commercial banks. . . . Of course, investor confidence and liquidity can shift. In the aftermath of a financial shock, if buyers and sellers can no longer agree on the distribution of possible outcomes, their ability to price transactions will be severely limited. Financial Crisis Warsh played a significant role in navigating the financial market turmoil of 2007 and 2008. According to author David Wessel, "Warsh established himself as the chairman's protector in Republican circles and Bernanke's bridge to Wall Street chief executives." Bernanke would write "Don Kohn, my vice chairman, with his long experience at the Fed, and Kevin Warsh, with his many Wall Street and political contacts and his knowledge of