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

Well, Mr. Chairman, I certainly understand how serious this matter is, and I guess I am of the view that alternative A is not going to solve much. There is a psychology, I understand, in the market that is going on, and I am not convinced that our continuing to take these actions and then having adverse outcomes is necessarily going to inspire confidence. I think we need to let our actions work their way through. Part of the problem is that the credit mechanism is stuck right now because of the tremendous uncertainties. Then I look at all of the things we have done over the last month, and the ramping up of the liquidity facilities has really exceeded even our ability to sterilize. So we have had, in effect, a funds rate that is well below our target. We have excess reserves in that period that were over $280 billion when they are normally $2 billion, and that was before we added more swap lines and more liquidity into the market. Frankly, I think we are at a point now where the liquidity mechanisms that we’re trying to use, not our interest rate targeting, are really our monetary policy. As we go forward, perhaps we need to think about how we are going to conduct monetary policy under a quantitative easing environment. That is what I think we will effectively be at if we move again today. So how we think about liquidity and about the credit mechanisms is really where more of our attention will have to be spent. Lowering the rate may have some positive effects, but I doubt it. So I would just stay where we are, let some of these past actions begin to work through, and see what the effects of those are before we then take another move because I think the market would just appreciate some stability over time in our actions so that they can see these things begin to work. It isn’t a problem of the interest rate level right now, in my opinion, so that’s why I would wait and see. Thank you.

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