Source stringclasses 1
value | Date int64 1.98k 2.01k | Text stringlengths 2 27.1k | Token_count int64 1 5.57k |
|---|---|---|---|
fomc | 2,008 | Well, that seems fine. We are monitoring these things. Is this the FOMC statement dictionary we are going to? Is this the code book? [Laughter] | 35 |
fomc | 2,008 | Any other comments? All right. Let me just ask for a straw vote: "closely," no "closely," or "carefully." Do we want "carefully"? All right. Is "carefully" more acceptable to those who are concerned? MR.KOHN. It's less of a code word. The intention was to loosen it up a bit but not revert to those code words that nearl... | 88 |
fomc | 2,008 | We make note of this in the lexicon of FOMC terminology. | 15 |
fomc | 2,008 | The semiotics class will begin as soon as the--[Laughter] All right. "Carefully"--is that okay? I'm seeing nodding. All right? Governor Warsh? | 38 |
fomc | 2,008 | Yes, sir. | 4 |
fomc | 2,008 | I'm closing the dictionary. | 5 |
fomc | 2,008 | All right. So we are changing the last part of that sentence. We are striking the word "market" and changing "closely" to "carefully." Any other comments or thoughts on the substance, sizzle, or marketing? Or as Rick would say, "moychandising"--but he's not here. [Laughter] All right. If not, Ms. Danker. | 80 |
fomc | 2,008 | I will be reading the directive from the Bluebook and the statement that was just circulated. "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee in the immediate future se... | 157 |
fomc | 2,008 | Thank you. The next meeting is October 28 and 29. Lunch will be available in the anteroom. While we have lunch, Laricke Blanchard will provide us with an update on congressional developments. Thank you all very much. The meeting is adjourned. | 57 |
fomc | 2,008 | Good afternoon, everybody. We received requests from members for more time at this meeting to discuss the economic situation and our policy response. So as you know, we postponed the special presentations on inflation--my apologies to the presenters. We will come back to that at the appropriate time. What we are going ... | 279 |
fomc | 2,008 | 1 Thank you, Mr. Chairman. Today my attention will be narrower than usual, given the briefings by Bill Bassett and Linda Kole that will follow covering the broader developments in the equity, fixed income, and foreign exchange markets in the United States and abroad, which have been considerable over the past six weeks... | 3,995 |
fomc | 2,008 | Thank you, Bill. Nathan. | 7 |
fomc | 2,008 | In response to intensified global financial stresses, the central banks of four major emerging market economies--Mexico, Brazil, Korea, and Singapore--have recently expressed interest in temporary liquidity swap lines with the Federal Reserve. For the reasons outlined in our background memo, which was circulated on Fri... | 1,442 |
fomc | 2,008 | 2 Thank you, Nathan. I will be referring to the exhibits labeled in red, "Staff Presentation on Financial Developments." The intermeeting period was characterized by persistent strains in financial markets and a sharp drop in asset prices. Although some markets have improved in recent days, the ongoing disruptions have... | 2,398 |
fomc | 2,008 | Thank you. I'm going to open up in a minute to questions for Bill, Nathan, and Bill. I want to say just three brief things about the emerging market swaps. First, we have been talking with these countries for some time, and I think when the conversations began it was more of a preventive measure than a response to cond... | 411 |
fomc | 2,008 | Just to follow up on your note, Mr. Chairman, I spent four years as the senior trade negotiator with all four of these countries, and I'd just like to comment on their importance to us. Mexico is obvious. It's a national security risk. We're interlinked economically. They have a sophisticated central bank and a very go... | 487 |
fomc | 2,008 | Thank you. President Evans. | 6 |
fomc | 2,008 | Thank you, Mr. Chairman. I thought there was some pretty good risk management described in the memo, but I didn't really follow or don't understand exactly the process by which we would generate a loss through these swap lines. Could you take us through the state of the world in which we would actually generate a loss?... | 129 |
fomc | 2,008 | I very much agree with the thrust of the question--it would take a very severe state of nature for us to sustain losses on these. We are protected by the full faith and credit of our central bank counterparty. In addition to that, when we give them dollars, we take their domestic currency. So I suppose, in some very ex... | 179 |
fomc | 2,008 | Okay. But it would be that we have their currency and presumably that would be a state in which it had depreciated. | 25 |
fomc | 2,008 | Absolutely. These would function very similarly to the swap lines that we have with the advanced economies. In addition, we are going to allow them to draw only $5 billion at a time at the discretion of the Foreign Currency Subcommittee. When the Foreign Currency Subcommittee makes the determination as to whether or no... | 111 |
fomc | 2,008 | Vice Chairman? | 3 |
fomc | 2,008 | A clarifying question, Mr. Chairman. Nathan, on page 4 of the memo, at the last bullet, you say, "FRBNY would have broad 'set-off rights.'" | 39 |
fomc | 2,008 | Yes, indeed. Maybe Trish and Bill want to jump in here as well. What this means is that, in extinguishing any obligation that arises from the swap agreement, if the central bank for some reason doesn't pay us, we can take other assets on the books that are being held by the Federal Reserve Bank of New York to extinguis... | 124 |
fomc | 2,008 | But there is nothing that prevents them from withdrawing those assets before that, right? Presumably, if they're in a situation of default, they would withdraw any Treasury securities held here first. | 37 |
fomc | 2,008 | They could do that. But any drawing under the swap agreement would be no longer than three months, and some drawings would be much shorter. So they would have to move very quickly, given the short nature of these transactions. But there are certain states of nature that are so severe that we couldn't rule it out. | 63 |
fomc | 2,008 | Vice Chairman. | 3 |
fomc | 2,008 | Let me just state my understanding of this so that I can be corrected by Nathan or by Bill. These countries hold substantial amounts of their reserves in dollars. They hold a substantial fraction of those dollars in accounts at the New York Fed. If they defaulted on their piece of the swap and the falling value of thei... | 203 |
fomc | 2,008 | I agree. | 3 |
fomc | 2,008 | But I thought we were concerned about a shortage of Treasury collateral in the market. So why wouldn't we want them to sell, and in fact, what are reserves for if they don't use them in these circumstances? | 42 |
fomc | 2,008 | I have never stood in their shoes, so I'm not sure I fully understand it. You are right that the world is a little short of the risk-free asset now, and so a greater supply would be terrific in some sense. But they have a general view, which I think our people share, that to meet the kind of lumpy, unpredictable, poten... | 330 |
fomc | 2,008 | President Lacker, you had a two-hander? | 11 |
fomc | 2,008 | Yes. President Geithner, you described the EMEs as motivated by a desire to transform their reserves from illiquid Treasuries or from Treasuries to some more fungible and more convenient form of dollars. That strongly suggests collateralizing their swap line with the Treasuries rather than their own currency. What woul... | 72 |
fomc | 2,008 | I think effectively we have done that by the way in which the thing is structured. | 17 |
fomc | 2,008 | But the point that President Evans made is that we're not constraining them to not withdraw the reserves. | 20 |
fomc | 2,008 | Do you mean that you want to put a reserve floor on them, too? | 16 |
fomc | 2,008 | The question is whether, in an unlikely but possible state of the world in which they don't want to pay us back, they could withdraw their Treasuries in advance of defaulting. | 37 |
fomc | 2,008 | Or we could lend to them, collateralized by the Treasuries rather than by their own currency. | 21 |
fomc | 2,008 | Well, lots of things are possible. I think this is a pretty good conservative balance. | 18 |
fomc | 2,008 | That would basically be a repo agreement, I guess. | 11 |
fomc | 2,008 | For what it's worth, the ECB has entered into something similar to that with the Hungarians, in which the Hungarians are able to repo to them long-term euro-denominated stuff and get euros back. | 41 |
fomc | 2,008 | Governor Kohn. | 4 |
fomc | 2,008 | Thanks. I think I'd be a little concerned about stigmatizing the swaps by saying that we have enough doubts about these other countries that we need to take collateral--we don't have confidence that their central banks will meet the obligations that they have taken on. So my preference would be to stick with the extens... | 223 |
fomc | 2,008 | President Fisher, a two-hander? | 8 |
fomc | 2,008 | Just responding to President Lacker. I think it would be an insult to these four parties, particularly given the fact that we appear to have negotiated, again, the ability to attach other assets. I am, frankly, surprised that Singaporeans would go along with that. If we got that, I'd use it and pocket it. But I would a... | 165 |
fomc | 2,008 | Let me say just a couple of quick things. One is that this would require renegotiating the whole thing from the beginning, and we would like, if possible, to do this tomorrow with the IMF. The second point I would make is that we do have considerable security, and we will be dispensing this--under strict conditions--in... | 96 |
fomc | 2,008 | I have just a clarification. This is a question. Don't we already have a swap line, a standing facility, with Mexico as a part of NAFTA? So we don't have to add it. | 40 |
fomc | 2,008 | We do have a swap line with Mexico. It's a standing swap line. It's $3 billion under the North American Framework Agreement. It's the counterpart to NAFTA. Under that agreement, we also have a $2 billion swap line with Canada. Here we would be adding a new temporary liquidity swap line, so it would be a new legal const... | 70 |
fomc | 2,008 | I guess my question is why we can't use the swap line that is already in existence. | 18 |
fomc | 2,008 | In principle, if you were so inclined, you could probably just raise the size of the existing swap line to $30 billion. However, we built in a variety of mechanisms and safeguards in this proposal. In addition, the structure of what we're putting forward is tailored particularly to meet the kinds of challenges and liqu... | 106 |
fomc | 2,008 | Let me go to President Rosengren, who has been waiting patiently. | 15 |
fomc | 2,008 | I have two unrelated questions. One follows up on this, but the other one is on the term auction facility. First, given how much we have expanded the term auction facility, is there any consideration to having a minimum stop-out rate, given that the last two have had fairly low stop-out rates? I wonder if that was bein... | 371 |
fomc | 2,008 | Under the term auction facility, there is a minimum bid rate, the OIS rate. So when we have a $150 billion auction and let's say there are propositions of $120 billion, the winning bid rate is the OIS rate for everybody. | 50 |
fomc | 2,008 | But I'm just wondering, as the OIS rate has come down, when you think of the band that we have for excess reserves, it does seem that the OIS provides a much bigger band, for example, than what we have even for excess reserves. I wonder whether, during periods in which people are considering a reduction of as much as 5... | 88 |
fomc | 2,008 | Yes, right now it is a very low rate because the market is building in future rate cuts. So I think the OIS rate is now below 1 percent on a three-month basis. | 39 |
fomc | 2,008 | But as we narrow the target for excess reserves and have a narrow band there, you wonder whether the stop-out rate, having a lower band that is a little higher than the OIS, might be an alternative way to think about it, now that we have the excess reserves option as to the lower bound. | 62 |
fomc | 2,008 | I think that is something worth considering. The emphasis right now has been getting term funding out in as much size as possible and not worrying so much about whether the cost of the funds is or is not at a penalty. So I think the emphasis of the program did shift a bit over the past six weeks. Obviously, if things s... | 105 |
fomc | 2,008 | Mr. Chairman, may I make an amendment to Eric's question or suggestion? I think that, when we have a chance to breathe and we feel as though we have achieved some durable stability in the panic, then we will want to reassess not just the basic complement of our facilities and how we think about the future but the relat... | 281 |
fomc | 2,008 | The awkward thing right now is that we are trying to add liquidity as powerfully as we can. So to raise the minimum bid rate or do anything that somehow suggests a pulling back would be a bit inconsistent with the LIBOR-OIS spread widening that we have seen and the fact that it still remains very, very elevated. You mi... | 114 |
fomc | 2,008 | President Hoenig. I'm sorry, Nathan had an answer. | 12 |
fomc | 2,008 | Could I just respond to President Rosengren's second question? | 13 |
fomc | 2,008 | Go ahead. | 3 |
fomc | 2,008 | I think you put your finger on two very difficult judgments that we made when structuring this facility. I don't see the risk of creating stigma for emerging market economies that are not in our swap network as being a first-order concern. It is broadly recognized that the folks that we are recommending are larger, mor... | 305 |
fomc | 2,008 | President Hoenig, I'm sorry. Go ahead. | 10 |
fomc | 2,008 | No, no. In fact, it follows right on with what Nathan was just answering. That is, for the moment we are creating kind of a broader in-list for these four countries and stigma with the non-accepted group at this point. What will happen, then, if we do have an issue that involves--pick a country--Chile? Are we going to ... | 196 |
fomc | 2,008 | I would hope that initiating these swaps would reduce the probability of bad outcomes in the emerging market economies. Certainly, if Brazil, Mexico, and Korea are up against the ropes and experiencing significant financial stresses, my sense is that it would be an environment in which many other EMEs would be experien... | 223 |
fomc | 2,008 | But it's something that we ought to think about sooner rather than later because the likelihood is that, if you take care of these four and you get another request, you are going to get three others and not one other. | 44 |
fomc | 2,008 | Wherever you draw the line, there is going to be somebody who is just a bit away from the line that says, "I am very similar to those folks." I am reasonably comfortable with where we draw the line. Here there is as much gap as you're going to find. In my mind, the next one for which you could make a case would be Indi... | 139 |
fomc | 2,008 | Have we been approached by any other countries? | 9 |
fomc | 2,008 | Yes, indeed, we have. We have been approached by 552 U.S.C. (b)(4) , and we have had very informal inquiries from a couple of other countries, including 552 U.S.C. (b)(4) . | 51 |
fomc | 2,008 | But we have not encouraged that. | 7 |
fomc | 2,008 | We have done everything we possibly can to discourage it. | 11 |
fomc | 2,008 | Just to be clear. | 5 |
fomc | 2,008 | That's right. We're not advertising. | 7 |
fomc | 2,008 | President Lockhart. | 4 |
fomc | 2,008 | Another question for Nathan on swap lines is how this works exactly. If the pattern holds and Mexico, for example, supports its banking system--in the case of Mexico it is a little different from others, in that all of the large banks are foreign-owned (Citibank owns Banamex, and the Spanish banks own the other two or ... | 127 |
fomc | 2,008 | A couple of thoughts. Certainly these home-versus-host issues bedevil many, many discussions of banking issues right now. They are true in Mexico, as you suggested, and they are true in spades in Central and Eastern Europe, where instead of U.S. banks there are European banks in the tension between the home and host. S... | 286 |
fomc | 2,008 | So in the case of a foreign bank--they lend to a foreign bank in their country, in Mexico in this case--defaulting, whose problem is it? Is it the home country supervisor's problem, or is it Mexico's problem vis-a-vis us? | 53 |
fomc | 2,008 | I would guess that it is a joint problem. | 10 |
fomc | 2,008 | Vice Chair. | 3 |
fomc | 2,008 | I'm not sure that this is helpful, but maybe I can give a slightly different example from another perspective. We have a bunch of U.S. affiliates of some of the weakest European institutions that have faced very substantial dollar funding needs and have come to us and asked for substantial ongoing access to liquidity. ... | 356 |
fomc | 2,008 | Very good. President Lacker. | 7 |
fomc | 2,008 | I have a question for the staff. You noted that the countries believed that this would help market confidence. So the choice of extending a line is potentially consequential here. I have a two-part question. First, what do you think the risk is of the uncertainty surrounding whether particular other countries will or w... | 141 |
fomc | 2,008 | As outlined in the memo and then also my remarks, the first is that we are looking for economies that are large and systemically important. The second is that we are looking for economies in which their policies have been strong and it appears that they are largely being influenced by contagion. The third piece is coun... | 426 |
fomc | 2,008 | And the first part of my question? | 8 |
fomc | 2,008 | Oh, I thought I got it. What was the first part? | 14 |
fomc | 2,008 | What sort of uncertainty might this engender about the likelihood of other countries qualifying? My recollection is that many economists have claimed that the IMF had this trouble in the 1990s, when interventions would give rise to uncertainty about subsequent interventions in other cases. | 52 |
fomc | 2,008 | Well, I guess I'm not sure I know exactly what you're driving at. Are you concerned that, by moving on these, we're sending a negative message about the ones we're not moving on? | 38 |
fomc | 2,008 | I'm just wondering about the uncertainty that might be created about the lack of clarity about who's in, whether this is the final list, and so on. | 30 |
fomc | 2,008 | Our press release that we are negotiating lists, as clearly as one can in a press release, the criteria that we were looking at--that they are large, well-managed, fundamentally sound, systemically important countries. So we are trying to communicate that. In addition, in conversations when these folks come to us--and ... | 119 |
fomc | 2,008 | Vice Chair, did you have a two-hander? | 11 |
fomc | 2,008 | Well, I just want to point out that I think these are absolutely the right kinds of questions about this. But I think these concerns are substantially mitigated by the fact that the IMF is putting in place a facility at basically the same time, which will be there with relatively little stigma for a range of other coun... | 275 |
fomc | 2,008 | President Plosser. | 5 |
fomc | 2,008 | I guess I'm worried about this for all of the considerations that President Hoenig and President Lacker have just been talking about. I don't know where we draw the lines, and when we have to go to the State Department and start asking what countries we can or can't develop swap lines with, I'm not sure those are the c... | 100 |
fomc | 2,008 | We have already said "no" to some of those. | 12 |
fomc | 2,008 | I understand, but if you really follow the logic of the argument about being large and systemically important, if we draw a line somewhere, we start expanding this now bit by bit and we draw a line somewhere, and the question then becomes, Will markets begin to question other countries on the periphery and create probl... | 295 |
fomc | 2,008 | President Plosser, a couple of things. The IMF has very limited resources. They're not remotely able to meet the needs of-- | 27 |
fomc | 2,008 | We don't know what the needs are yet, do we? | 12 |
fomc | 2,008 | Well, the resources are very limited. The other thing is that the staff asked for guidance on the limits here. I'd like to propose that, when we get to that point, to ask the voters to suggest how they stand and what qualifications they might have. One thing that you could do, for example, would be to say, "I do or do ... | 122 |
fomc | 2,008 | Just to put some numbers on IMF lending capacity--total IMF lending capacity is about $250 billion. To get even that high they have to call in some special arrangements that they have with a variety of countries. The maximum capacity is $250 billion. So the $120 billion that we're proposing today would be essentially h... | 262 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.