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fomc | 2,007 | Quickly, as a follow-up to that--if you are successful in getting rid of the stigma problem, then does the discount window effectively disappear? | 30 |
fomc | 2,007 | No. | 2 |
fomc | 2,007 | But there might be pressure for it to disappear because this certainly would be more desirable than the discount window. It's cheaper, and there's no stigma. | 29 |
fomc | 2,007 | But this is a temporary program. | 7 |
fomc | 2,007 | Deposit insurance, I'll remind you, in 1933 was temporary. | 14 |
fomc | 2,007 | But when you have that inadvertent overnight overdraft that you are facing, you can't wait until the weekly auction. | 23 |
fomc | 2,007 | Okay. Well done. | 5 |
fomc | 2,007 | You are capping the amount in a way that you could not reasonably decide you're going to cap total access to the discount window. | 26 |
fomc | 2,007 | Of course, this wouldn't substitute at all for secondary credit, by construction. | 15 |
fomc | 2,007 | Governor Kohn. | 4 |
fomc | 2,007 | In my thinking about the stigma point, the time line is an important part of that. If you have to submit your bid on Monday to get awarded on Thursday, this is not the action of a bank that's desperate for funding. I think the stigma comes because, at the discount window, apart from bidding strongly at the end of the d... | 130 |
fomc | 2,007 | Okay. Why don't we start our go-round? President Lacker. | 14 |
fomc | 2,007 | Thank you, Mr. Chairman. I've been thinking a lot about this since I heard about it last week. I want to start by complimenting the staff at New York and the Board who wrote the summary memo. I think it does a very good and balanced job of articulating the costs and benefits of this proposed facility. I was going to sa... | 1,588 |
fomc | 2,007 | Let me echo what you first said and congratulate the staff on an enormous amount of work and a terrific presentation. I do want to just say a word, President Lacker. Most of your arguments are premised on the idea that markets are basically in some kind of equilibrium and we're just messing with the equilibrium. There'... | 458 |
fomc | 2,007 | I like the idea. I think it does reduce stigma, and it would likely reduce the spread during a time of crisis. I would want it spread out among a larger number of institutions than just five because I do worry about that potential. While I know that in your documentation you highlighted that there wouldn't be a way to ... | 260 |
fomc | 2,007 | Thank you. Governor Kroszner. | 9 |
fomc | 2,007 | Again, I'll echo praise for just the incredible work that the staffs have done--a very clever way to address some specific problems that we're facing. One is the stigma problem, and two, as I mentioned earlier, is the source of the uncertainty. We don't really have the tool to get at that directly; we can get at it onl... | 656 |
fomc | 2,007 | Thank you. President Hoenig. | 7 |
fomc | 2,007 | One of the appealing things about it is that it broadens options, and I think that, any time you are in a set of circumstances where you have to find solutions, broadening your options is good. I appreciate the fact that we are not voting on this today because I think it deserves a little further thought, especially ab... | 158 |
fomc | 2,007 | Okay. President Poole. | 6 |
fomc | 2,007 | The staff did a fine job of designing and explaining. I want to concentrate on the issues that I have. I'm pleased that we're not about to launch it. If we had, one of my concerns is that the United Kingdom is left out, which I assume is by choice, but it might still create a whole lot of issues for the United Kingdom.... | 202 |
fomc | 2,007 | We didn't say. It was based on a market rate for term funding. | 15 |
fomc | 2,007 | But weren't we going to announce that this overnight index swap-- | 12 |
fomc | 2,007 | No, I don't think that had been the plan. | 11 |
fomc | 2,007 | Okay. But then the first time that you change that rate you are going to raise a whole lot of questions--Well, how did you decide how to change it? I'm more worried about the transparency of setting it that way because it is bound to raise questions about where that rate comes from. How did you decide on this one? It m... | 85 |
fomc | 2,007 | This is news to me, by the way, because the logic of this was that the normal spread between the overnight index swap and term funds is about 10 basis points. | 35 |
fomc | 2,007 | Yes, but that depends on the market's expectations of where the funds rate is going to go. | 20 |
fomc | 2,007 | But the OIS captures that--the one-month OIS. | 13 |
fomc | 2,007 | I understand that, but that can be different from the current target rate that's in effect right now. That's my point. This rate could be below the current target rate, and that seems to me to create an issue that we are going to have to be prepared to explain, and I'm not so sure that's going to be easy to explain. At... | 82 |
fomc | 2,007 | Are you saying that the minimum rate is going to be a secret? | 14 |
fomc | 2,007 | Well, they'll figure it out. | 7 |
fomc | 2,007 | Won't they figure it out almost immediately? | 9 |
fomc | 2,007 | If they're going to figure it out, why don't we tell them? | 14 |
fomc | 2,007 | The question is whether you identify a particular market rate that you're pegging or whether you say you're looking at market-based rates. I think that's a decision variable of this program. | 35 |
fomc | 2,007 | I just didn't realize this was as highly confidential. | 10 |
fomc | 2,007 | But you have the auction announcement. You must tell the bidders ahead of time what the minimum rate acceptable is. | 22 |
fomc | 2,007 | You'll tell them the basis points. | 7 |
fomc | 2,007 | Yes. | 2 |
fomc | 2,007 | They should figure out pretty quickly what this rate means. | 11 |
fomc | 2,007 | I would suggest that we not get too involved in this. I think we ought to be as transparent as possible. | 23 |
fomc | 2,007 | No, but I just say that I think there's a transparency issue here that might have to be explained. So I'll just leave that on the table to be talked about. There is certainly a risk that this facility will not be--well, maybe this would not be a wrong judgment--available to small banks, and the large banks would be get... | 404 |
fomc | 2,007 | Thank you. President Fisher. | 6 |
fomc | 2,007 | Mr. Chairman, a lot of what I have thought about this since I realized we weren't going to do this immediately has been addressed by the previous individuals who have spoken. I'd just like to touch on a few points. First, like everyone else, I want to congratulate the staff for excellent work. It is creative. It's also... | 595 |
fomc | 2,007 | Thank you. President Evans. | 6 |
fomc | 2,007 | Thank you, Mr. Chairman. It's a very creative proposal, and I agree basically with the comments that President Rosengren and Governor Kroszner said about it. It's important that the collateral be appropriate and well established, and it's definitely better if we don't have simply a small number of borrowers. It's also ... | 179 |
fomc | 2,007 | Thank you. President Lockhart. | 7 |
fomc | 2,007 | I, too, want to congratulate the staff on a creative proposal. I think I need more time to think about this, but let me offer, just to some degree, speculative remarks. They're speculative because it has been a few years since I've even been around a treasury of a money center bank, but I do think I have some feel for ... | 593 |
fomc | 2,007 | Thank you. President Pianalto. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. My inclination after reading the memo over the weekend was to be supportive of the proposal. However, given some of the comments that I've heard from my colleagues today, I welcome the additional time to think about some of the concerns, especially some of the issues that President Rosengren ra... | 236 |
fomc | 2,007 | Thank you. President Plosser. | 8 |
fomc | 2,007 | Thank you, Mr. Chairman. Actually, I do have some sympathy for this proposal. I think it is very creative. But there are a lot more people around this table who know a lot more details about this market, how it works, and how treasurers work than I do, and I will certainly defer to their judgment. But I have a couple o... | 552 |
fomc | 2,007 | President Stern. | 3 |
fomc | 2,007 | Thank you, Mr. Chairman. Well, at this time, my bottom line on this proposal is that it's okay, but I'm not altogether enthusiastic. It's okay because I think having another arrow in our quiver is not a bad idea, and so to have done the work and put this forward strikes me as clearly constructive. I'm not enthusiastic ... | 339 |
fomc | 2,007 | Governor Kohn. | 4 |
fomc | 2,007 | Thank you, Mr. Chairman. I think this is aimed at addressing a serious problem that I'm afraid we're losing sight of a bit. The piling-up of financing in very short term vehicles is an issue for financial stability. Partly this is, yes, the term rates are elevated, and if this were just a risk premium on certain counte... | 1,040 |
fomc | 2,007 | Thank you. Governor Warsh. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. Very briefly, when I think back about a week ago to maybe one of the darker days that we've had in the past six weeks, there were so many more institutions that were funding themselves on an overnight basis that it wouldn't take much imagination for us to get very fearful very soon if there wer... | 374 |
fomc | 2,007 | Thank you. President Yellen. | 7 |
fomc | 2,007 | Thank you, Mr. Chairman. I also want to congratulate the staff. This is a very clever and targeted intervention, and it's a very nicely put together proposal. I'm supportive. I think it's something that's good to have available. I'm glad that we're not planning to put it in place instantly. It does have the potential t... | 560 |
fomc | 2,007 | Thank you. Governor Mishkin. | 7 |
fomc | 2,007 | I think that this proposal has an important advantage in that it is channeling funds to a place where they are most needed, so it has macroeconomic consequences. If you think about it, open market operations are a very blunt tool. Here you are actually able to direct credit to a market that isn't working. We have a LIB... | 721 |
fomc | 2,007 | Thank you. Vice Chairman. | 6 |
fomc | 2,007 | Just a few quick things. First, I should say that the concerns and questions you all put on the table are the right set of concerns and questions. Some of them can be resolved by tweaking the design of things, but some of them we will not be able to resolve with changes in design, and we'll have to decide whether or no... | 657 |
fomc | 2,007 | So thank you very much. I appreciated this discussion a great deal. I did not hear a great deal of opposition to the principle that the Federal Reserve at times should help markets function when they are in a state of panic or otherwise in serious dysfunction. So in that respect, I think that this is the kind of tool t... | 321 |
fomc | 2,007 | Good afternoon, everybody. This meeting is Karen Johnson's last. She attended her first meeting in 1991 and has been a regular participant for the past ten years, so she has ninety-one total FOMC meetings to her credit. Karen has been briefing the FOMC on international financial and economic matters since she became he... | 210 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | I have the less pleasant duty of reminding everybody about the Wall Street Journal article on our communications policy that appeared some time ago. I don't think anybody actually leaked the story, because the way Greg Ip works is that he goes around and talks to each person and gets a little of the story and then buil... | 157 |
fomc | 2,007 | Without objection. Thank you. Next, we turn to Bill Dudley. | 15 |
fomc | 2,007 | 1 Thank you, Mr. Chairman. I am going to miss Karen as my fellow scribe at the BIS. She also was the person who identified who was actually speaking. [Laughter] Two crosscurrents have dominated financial markets since the September 18 FOMC meeting: (1) greater discrimination by investors with respect to credit quality ... | 2,522 |
fomc | 2,007 | Thank you very much. Are there questions for Bill? No questions? Okay. Then, may I have a motion to ratify? | 27 |
fomc | 2,007 | So moved. | 3 |
fomc | 2,007 | Without objection. Thank you. A very thorough briefing. I don't know if we will have the same luck over on this side. [Laughter] Let me turn to Dave Stockton to begin the economic situation report. | 43 |
fomc | 2,007 | Thank you, Mr. Chairman. From a forecast perspective, it's been a pretty wild ride over the intermeeting period, with our outlook for activity shifting sharply at various points in the process in response to large swings in the stock market, the exchange value of the dollar, and the price of crude oil. A couple of week... | 2,236 |
fomc | 2,007 | Although the foreign economies appear to have grown at a moderate pace during the third quarter as a whole, indicators for September and October suggest that the recent financial turmoil may yet leave an imprint on activity in some countries. Perhaps the most striking evidence on this score has been the ECB's survey of... | 1,460 |
fomc | 2,007 | 2 I will be referring to the package labeled "Material for FOMC Briefing on October Projections." The table shows the central tendencies and ranges of your current forecasts for 2007 and the next three years. Where available, the central tendencies and ranges of the projections last published by the Committee--those su... | 984 |
fomc | 2,007 | Thank you. Are there questions for our colleagues? Vice Chairman Geithner? | 16 |
fomc | 2,007 | Dave, this is about the Greenbook forecast--I was going to say existentialism, but I am not sure that is quite right. [Laughter] Dave, is the Greenbook forecast something we should view as a modal forecast, as I think you implied, or the expected value of the range of plausible scenarios that might have-- | 68 |
fomc | 2,007 | Well, I would say this is a modal forecast, and as I indicated, I think there is probably more downside mass than upside mass in that probability distribution at this point. | 35 |
fomc | 2,007 | Is the monetary policy path that you reveal in the Greenbook based on the modal forecast? | 18 |
fomc | 2,007 | Thinking about our forecast as a modal forecast is correct. | 11 |
fomc | 2,007 | Thank you. If I could ask one more question. In the Greenbook, you reveal the usual assumptions for what you anticipate for total credit growth, and you show it decelerating significantly over this period. How does the deceleration you are anticipating look compared with a range of previous periods in which the U.S. ec... | 114 |
fomc | 2,007 | Well, I should get the facts before I answer your question in terms of exactly how this compares with both the 2000 period and the 1990 period. We could certainly do that and circulate it to the Committee. Obviously, in our forecast we have credit growth decelerating not just because overall activity is decelerating bu... | 213 |
fomc | 2,007 | President Plosser. | 5 |
fomc | 2,007 | Thank you. I have two brief questions. One, in business investment, particularly equipment and software, you have somewhat of a rebound in the early half of '08, and then it falls off again in the latter half of '08. I didn't quite understand. Given the way you have the recovery in housing coming in the middle of '08 a... | 174 |
fomc | 2,007 | We took that estimate from a paper by Ben Bernanke and Ken Kuttner. [Laughter] | 21 |
fomc | 2,007 | I thought that was 5.3 percent for 100 basis points, right, which would be a decline of a little over 1 percent, not 2. | 34 |
fomc | 2,007 | Of course, we have multiple estimates. [Laughter] | 12 |
fomc | 2,007 | Sorry. I just read the wrong one | 8 |
fomc | 2,007 | We felt that in the past we did not typically worry about that sort of surprise effect, given that overall our ability to predict asset prices is so limited to begin with. This seemed stark enough that we thought we should probably lean in that direction. Whether we are too large or too small I don't know. It's not a v... | 119 |
fomc | 2,007 | And the investment piece? | 5 |
fomc | 2,007 | It looks to me as though some of the investment piece has to do with the idiosyncrasies of our forecast of the high-tech area. The underlying core piece of E&S spending follows pretty much a standard accelerator path, where things slow down more evenly through next year and then begin to pick up with the overall pickup... | 164 |
fomc | 2,007 | Thank you. | 3 |
fomc | 2,007 | President Poole. | 4 |
fomc | 2,007 | I have two questions. I guess the first is more a comment than a question. When we look at the net exports--and I think you commented on that in terms of the outlook--it seems to me that most of it is really coming on the import side, which I assume is importantly related to domestic demand and consumption. Looking at ... | 238 |
fomc | 2,007 | So do you want me to start with that? | 10 |
fomc | 2,007 | Sure. That sounds good. [Laughter] | 10 |
fomc | 2,007 | On the anecdotal side, as I think about the revisions that we've made to the forecast of this most recent period, by which we have taken down the level of GDP nearly 3/4 percentage point for our estimate of the effects of the financial disturbance, I don't know whether you'd call that based on anecdotal or on actual da... | 566 |
fomc | 2,007 | In response to your first question, I think the answer is that it's the improvement in the net export contribution in the current account that's being driven by both a strengthening of exports and a softening of imports. The net export contribution or the direct contribution of exports to GDP growth has risen roughly 2... | 245 |
fomc | 2,007 | Other questions? If not, we're ready for our economic go-round. President Hoenig. | 18 |
fomc | 2,007 | Thank you, Mr. Chairman. I will talk a little about the District this time. It continues to perform well, with ongoing weakness in the housing sector offset by strength in agriculture and energy. As has been true for a while, construction activity remains mixed, with weakness in residential construction offset by conti... | 981 |
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