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

So, yes, what we have proposed is that the additional cushion be taken against all loans more than one business day—primary credit and TAF, not seasonal credit. Clearly one could make a decision about where that point should be, and unless you can do it in a trend line, which our systems don’t make operationally easy or comfortable for us, there will be a discrete point. An alternative would be to do it at some particular point in time, and there would be costs and benefits. On the one hand, it would make some more comfortable with the collateralization at very short terms. On the other hand, you also want to be comfortable with the incentives that we will create for DIs, if they are collateral constrained, to take loans of the short term that go just up to that point and continue to roll them. For example, let’s say that your point was one week. Banks that are not collateral constrained probably would take the longer-term loan. Banks that are collateral constrained, the ones that you probably want to follow most closely, are likely to take the loan for six or seven days and then roll it and roll it and roll it again.

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