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

Let me ask you about the margin spiral you talked about, that this could help prevent. I would be interested in hearing your comparison of this option proposal with simply expanding the size of the TSLF offer by an equivalent amount. In just my simple, basic sort of thinking through this, I can’t see any difference in the degree to which those two alternatives would prevent the kind of margin spiral you are talking about. Presumably you’d have a margin spiral under this option plan if some big demand for dumping securities occurs, once they tap out both the regular TSLF and draws on these options. That’s the extra securities that we are absorbing off the market. If the TSLF is the same amount, we’d provide the same amount of insurance against a margin spiral. Is there some reason to prefer this as a way of ensuring against margin spiral versus just expanding the TSLF amount?

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