Thank you, Mr. Chairman. Just a few quick points. We feel somewhat better about the outlook for growth and inflation, but we haven’t really changed our forecasts for ’07 and ’08. So just as we expected over the past few cycles, we currently expect GDP to grow roughly at ...

Does Mr. Lacker have an alternative explanation?

Just in orders of magnitude—if we did another 25 or 50 basis points and there were some sort of associated changes in overall financial conditions so that that was reinforced, you’d get a core PCE inflation forecast that would go how far down? Would it go to 1 ...

Though I don’t want to pin you down, that sounds sort of modest. You are saying that with another 25 basis points you’d get what core PCE inflation over the forecast period?

Charlie, I’m not sure I understand your thinking. You said that you expect what sounded like a pretty significant moderation in core PCE, but that’s on a monetary policy assumption that implies further tightening.

No, between official flows and global—really industrial- country—real interest rates.

This is a different question for Joe. Your exhibit 10 describes broad trends in net official capital flows from emerging markets to the United States and global real interest rates. Has your view about the relationship between them changed? I thought we had sort of the conventional view. The accepted ...

I have two questions. The first is about our inflation forecast. We’ve discussed several times the basic question about whether the now-prevailing level of long-term inflation expectations in markets is likely to provide support for forecasts of further moderation or likely to constrain the prospects for further moderation in ...

Bill, could you or Dave remind us what share of the total outstanding stock of mortgages consists of subprimes or what share of the housing stock do we think is financed at the subprime level? My recollection is that the share is still small even though it has been a ...

I think we should rule out humor. [Laughter] This is an important annual process, and New York plays an important role.

That’s a long way away. [Laughter]

The nonmeeting part of the meeting?

The expected duration of the next part of our meeting is four hours, three hours? [Laughter]

I also think it would be helpful, as the staff looks at the policy options going forward, that they do other parts of the communication options, too—not just those but also other ways to think about how to make policy for looking at and communicating a path that are ...

Mr. Chairman.

Mr. Chairman, I support alternative A, both the action and the language for the reasons I said earlier. I just want to make a couple of other points. I think the only way to be predictable in a crisis like this is to be predictably inert or to be late ...

Thank you, Mr. Chairman. We expect a recession at least as bad as the 1990–91 recession, with a significant risk of a deeper, more protracted downturn worse than the ’80s, and a very substantial rise in the unemployment rate. Inflation is decelerating quickly, and deflationary forces are ascendant around ...

Chile, Mexico—

I’m in favor. On the basic question of how you would deal with other requests beyond the four, Nathan gave two options. One is that you delegate to the subcommittee discretion to make those judgments. The second option was to say, “No, not without coming back to the Committee ...

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 ...

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 ...

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 ...

Well, lots of things are possible. I think this is a pretty good conservative balance.

Do you mean that you want to put a reserve floor on them, too?

I think effectively we have done that by the way in which the thing is structured.

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 ...

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 ...

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.’”

Mr. Chairman, I support your recommendation and the statement as drafted and commend you for taking this initiative and bringing together the central banks of the major economies at this time. I would just say that there is substantial risk that this will get substantially worse before it gets better ...

I just wanted to point out that I have assembled a historic coalition in New York of hawks on both sides of me today in support of your proposal. They have agreed to join me here in New York as a gesture of support for your proposal.

I’m not sure this is the right way to think about it, but you could think about the use of our balance sheet as a necessary but not sufficient condition to achieve Charlie’s objective, which is to help stabilize the financial system and make sure that intermediation begins ...

Could I just add something, Mr. Chairman, to what Bill said?

Second would be some expanded section 23A approvals to facilitate what the clearing banks need to do to provide liquidity. Another option would be to expand the scope of instruments that might be supported through that program. Another option might be to lend directly to money funds against a broader ...

Eric may be a little closer to this than I am at the moment. Again, they’re looking at it broadly, conceptually. The options fall into expanding the scope of the types of funds covered by the—what’s it called, Eric?—the AMLF.

It is obviously not my decision, but they are looking at options that go in the direction of expanding the liquidity support provided both to the agent banks and perhaps directly to the funds themselves.

Mr. Chairman, could I just add one thing? Maybe Eric could speak to this. I think the only other thing at the moment that deserves some quick reflection is whether the Federal Reserve should be modifying the facilities it put in place for money market funds last week. A team ...

Thank you, Mr. Chairman. I support alternative B for the reasons that you and many others have already stated.

Thank you, Mr. Chairman. Like the Greenbook, our modal forecast shows weaker real activity and slightly higher core inflation over the forecast period. Downside risks to growth remain substantial, in my view, and have probably increased relative to what we thought in June. Risks on the inflation front remain weighted ...

I was just going to say this. I think that you can do crude estimates of likely total losses across the U.S. economy and credit markets in a scenario like the baseline scenario in the Greenbook, and if you use Nellie Liang’s study or the stuff done in ...

Yes. It means that it’s another way of saying that you wouldn’t expect the estimates of the now-prevailing equilibrium real fed funds rate to be higher. Not to stretch this too far, but another way of saying why the likely expected path or the appropriate path of policy ...

I was just going to say that I thought the interesting thing about that scenario was that it doesn’t really change your view about the appropriate path of monetary policy going forward. It’s basically at the baseline. So even if you were to build in a material change ...

I have a question similar to President Plosser’s. Both the financial shock—the housing adjustment—and the big relative price shock you could say all in different forms could hurt the rate of growth of the economy’s productive potential. You could say that they all might, in some ...

Just to underscore, Mr. Chairman, what I said, I think President Evans is right—I would not be prepared to make a recommendation today on 28 alongside 84. I think it just needs a little more time, not a lot more time, but we have to think through it to ...

I am comfortable supporting the 84-day extension, and I would be supportive of splitting it. But I’d like to think a little more about both operational issues and how that would work. In principle, since I would be comfortable with 84, I would be comfortable with two tranches or ...

Thank you, Mr. Chairman. Let me make just a few quick points. There is no way you can state these things with perfect clarity and conviction, but my sense is that we are in a period in which the sets of basic pressures we’ve been living with now for ...

There are many things that I would love to do. I would like to make them pay for it and say that we are not going to extend it unless they pay for it. I would like to say that we are not going to extend it unless they pre-fund ...

First, I completely agree that, once we get to the point at which we believe the best policy is to dial this stuff back and transition to a world in which they don’t exist, we are going to want to look at a whole bunch of things—changing terms ...

I obviously support the strategy laid out. I just want to underscore, particularly in response to Governor Warsh’s comments, that this is in effect a conditional extension, in the sense that we are being careful to get ourselves more comfortable with where these four firms in particular are on ...

Yes. You know, these are deep, consequential questions we face. This is a question on the economy, and we’re not going to resolve it today. I think it’s important that we recognize that we’re going to have to build some time into our agenda—later this year ...

May I make a suggestion?