Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Our view is that spreads are high mainly because people can’t get leverage—that is number 1. Number 2, the traditional buyers of these AAA-rated assets either have disappeared completely, like SIVs and bank conduits, or have balance sheet constraints. So the risk capital hasn’t really been willing to come in because they can’t get the financing to make it worth their while. You know, LIBOR plus 300 is not an attractive proposition for someone who is using capital on an unleveraged basis.

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