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

Thank you, Mr. Chairman. I strongly support the proposed term securities lending facility. I certainly agree that we face a situation in which systemic risk is large, and it’s escalating very quickly. A dangerous dynamic has set in. Bill, Don, and all the memos did a great job in describing it. I think financial stability is truly at stake here, and although there are financial and reputational risks in pursuing this approach, it is a creative and well-targeted approach, and it is worth taking these risks to try to arrest the downward spiral in market conditions. Our monetary policy efforts have been seriously thwarted by the spread-widening that’s taking place, and the rapid escalation we’re seeing in these spreads—large increases in a matter of just the past couple of days in the absence of significant news that relates to the real creditworthiness of borrowers—suggests to me that the spread increases are, indeed, related to deteriorating liquidity conditions and not primarily to higher underlying credit risk. I think it is absolutely right to worry that liquidity problems are escalating into solvency problems. So as with the TAF, I am not 100 percent convinced that this is going to work, but I definitely think it is a good idea to move ahead and to do so quickly.

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