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

Without objection. This is a joint Board–FOMC meeting because the issues on liquidity provision that we are going to be discussing today require both Board and FOMC actions.

At the last FOMC meeting, the one in June, we discussed briefly some of the facilities— the TAF, the PDCF, and the TSLF—and I think there was an agreement that we would be announcing an extension of those beyond year-end. At that time, I suggested that we might take a notation vote on those issues. However, the staff has proposed a couple of additional wrinkles, which would make sense to announce at the same time that we announce an extension. Because we want to get your views on these, I thank you for taking the time to join this meeting.

Two additional suggestions have been made. The first is to add an auction of options to the TSLF to allow dealers to bid for the option to have access to the TSLF over critical short periods such as over year-end. We will get more explanation of that. The second proposal is to extend the maturity of the Term Auction Facility from the current 28 days to 84 days. As you know, the Swiss National Bank and the European Central Bank have been conducting auctions pursuant to our TAF auctions. We have contacted them and told them that we are considering the extension in time. If we do that, they have both indicated that they would want to follow and do three-month auctions with us. To make that work out, we are going to propose a small increase in the ECB swap line—well, not small, but from $50 billion to $60 billion. I guess $10 billion is large money anywhere. The purpose is that they can divide that by six and have a more even number for auctions.

The reasons I thought that we should discuss this now instead of waiting for the meeting in a couple of weeks are, first, that there is considerable interest in what we are going to do with these various facilities and already some reporting about them, and I think it is better for us to get this out sooner rather than later. If we decide today to take these steps—in particular, if we decide to lengthen the TAF—for purposes of coordinating with ECB, they would have to get approval from their governors as well. The bottom line is that our announcement would be next Wednesday morning, so we would not be quite ready to announce for a few more days. In addition, because I do want everyone to have a chance to give their views and we have only a one-day meeting coming up, I thought it would be better to get this done before the FOMC meeting. Again, the issue at hand is whether to make these two additional modifications to our liquidity program.

I am going to turn to New York and ask Bill Dudley to brief us on these proposals. He will be assisted by Debby Perelmuter and Sandy Krieger. After that, there will be time for Q&A with them; with Brian, who is here; with Scott Alvarez; or with anyone on the staff. Following that, we will have an opportunity for discussion. The votes are actually kind of complicated because the responsibilities for these programs are divided in various ways between the Board and the FOMC. But we will get to that, I guess, at the appropriate time. So let me now turn over the meeting to Bill Dudley. Bill.

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