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

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 relative economics of what we’ve done with the dollar swaps and our existing open-end auction facilities for institutions. Ideally, we want a situation in which it is more attractive for them to borrow from their foreign central banks—the dollars we provided through the swaps—than to come to us in our auctions and other areas through their U.S. affiliates.

I am a bit less troubled by the point you made than I am by the fact that we have set up a regime in which the incentives for them to come to our facilities are still substantial when they have now the ability they didn’t have before to go to their foreign central banks for dollars in large scale. As we think about consolidation and not just exit—about how we prepare the ground for a shift over time—I think we want to come back to looking at the relative economics between our dollar facilities for U.S. banks and U.S. affiliates of foreign banks and what is open to them from their home country central banks now. As part of that, we could think about size, reserve price, and price in our auction.

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