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

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 being considered at all, given how much we expanded the size. Then the second question gets to the stigma issue related to the swap lines. There was quite a lot of discussion about how to differentiate the countries. I had the same thought that President Lacker had—if we could have set-off rights that enable them to collateralize the swaps. I do think going to the IMF will attach a fair amount of stigma to the organization. So I am worried that the spillover benefits to other countries will be negative, not positive, because of that stigma. One option would be to say that either you could go to the IMF or we would provide collateralized loans for other than these four, since it sounds as though these four are a done deal. But rather than trying to draw the line and figure out whether Chile or some other country is appropriate, we could collateralize it. If they held enough Treasury securities at the New York Fed, then it would seem that we would have no reason not to do it. If they didn’t have Treasury securities, which would probably partly reflect some of their own mismanagement in their countries, then they wouldn’t be able to use the facility and would have to use the IMF. But it would seem to be a way to get around some of the stigma issues, if someone chose to come to us and fully collateralize it. That might be an alternative way to draw the line rather than trying to come up with criteria that seemed a little difficult to understand, as I went through the memo.

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