MR. KOHN
The Federal Reserve will continue to accept a broad range of collateral for discount window loans , including home mortgages and related assets .
MR. KOHN
The Board is also announcing a change to the Reserve Banks ' usual practices to allow the provision of term financing for as long as thirty days , renewable by the borrower .
MR. KOHN
The relationship of financial markets to real activity is multifaceted , not easily modeled with interest rates and stock prices , especially when markets are reconsidering risk .
MR. POOLE
Perhaps what is going on here is simply what is also in the Greenbook 's second-quarter numbers , because the goods part of the economy -- consumption -- is pretty flat .
MR. DUDLEY
Although U.S. inventories remain high relative to the five-year historical average -LRB- as shown in chart 14 -RRB- , this situation has persisted for some time without having a big effect on prices .
MS. YELLEN
Banks are showing increasing concern that their capital ratios will become binding and are tightening credit terms and conditions .
MS. YELLEN
Data on house sales , prices , and construction have been downbeat , and foreclosures on subprime loans have moved even higher .
MR. ROSENGREN
While incoming data have generally been weak , some higher-frequency data , like the recent labor report , might be consistent with a stronger outlook than the Greenbook forecast .
MR. ROSENGREN
However , those flows could quickly reverse if investors lose confidence in their ability to redeem money market funds at par .
MR. WILCOX
In line with our custom in years past , we carried the revision to the growth of potential through into the forecast period .
MR. WILCOX
The second scenario adds a deterioration in consumer sentiment , giving the meltdown in the housing sector an additional vehicle for spilling over into consumer spending more generally .
MR. KROSZNER
As a number of you know -- and all of you have been facing pressure on some of these things -- we will be putting out the subprime adjustable-rate mortgage guidance that we put out for comment just at the end of February .
MS. LIANG
The sharp rise in loans reflects in part greater demand , particularly for collateralized loan obligations -LRB- CLOs -RRB- , by institutional investors , who are estimated to have purchased more than half of these loans last year .
MS. LIANG
However , in view of the sparseness of earnings warnings thus far , we expect second-quarter earnings to top analysts ' forecasts by a few percentage points .
MR. DUDLEY
Exhibit 8 shows the structure for a representative CLO : More than two-thirds is AAA-rated debt , and 87 percent is investment grade .
MR. DUDLEY
It also reflects efforts to hedge subprime risk by going short these indexes by people who ca n't liquidate securities easily .
MR. DUDLEY
In particular , as shown in exhibit 6 , corporate default rates for both investment-grade and below-investment-grade borrowers have been at very low levels .
MR. DUDLEY
In addition , the asset-backed commercial paper market is very skittish in two areas -- structured investment vehicles and extendable commercial paper programs .
MR. DUDLEY
I request a vote to ratify the operations conducted by the System Open Market Account since the June FOMC meeting .
MR. DUDLEY
For example , global growth has been unusually strong with little volatility , and corporate profit margins are unusually wide , both in the United States and elsewhere .
MR. DUDLEY
Nevertheless , other measures also underscore the positive fundamentals of the corporate sector -- in contrast to the poor fundamentals in residential mortgages .
MR. DUDLEY
Finally , I want to discuss briefly the Desk 's performance in implementing the FOMC 's directive from the last meeting for a 4.75 percent federal funds rate target .
MR. DUDLEY
Two other market developments deserve a brief mention before I turn to dealer expectations concerning monetary policy and a brief look at inflation expectations .
MR. DUDLEY
More recently , however , they have diverged a bit , with the Board staff measure showing a more persistent increase following the September FOMC meeting .
MR. DUDLEY
I request a vote to ratify the operations conducted by the System Open Market Account since the September 18 FOMC meeting .
MR. DUDLEY
You can see that by the fact that U.S. 10-year Treasury note yields are still fairly low , trading around 4.4 percent .
MR. DUDLEY
The good news , of course , is that as time passes , the uncertainty about bank balance sheet pressures and funding requirements should lessen .
MR. DUDLEY
I request a vote to ratify the operations conducted by the System Open Market Account since the August 7 FOMC meeting .
MR. DUDLEY
Exhibits 19 and 20 compare the dealer surveys before the August 7 FOMC meeting and before the current FOMC meeting .
MR. LACKER
Banks are paying a lot for insurance against term funding costs to them going up , and a lot of banks are forgoing large spreads in order to marshal their resources .
MS. YELLEN
With respect to economic activity , I 've downgraded my forecast for growth in the fourth quarter by about the same amount as Greenbook and lowered it only marginally , a bit less than Greenbook , in 2008 .
MR. DUDLEY
Moreover , there are few signs of significant contagion from the subprime mortgage market into the rest of the mortgage market or from subprime mortgage credit spreads to corporate credit spreads more generally .
MR. DUDLEY
In the most recent episode , the VIX index rose 848 basis points , and the BB corporate spread rose 27 basis points .
MR. DUDLEY
Second , I want to talk a little about the decline in U.S. equity prices and the accompanying rise in actual and implied price volatility .
MR. DUDLEY
An investor with speculative risk positions that would be vulnerable to economic weakness might hedge these risks by buying Eurodollar futures contracts .
MR. DUDLEY
The result is that the volume of subprime mortgage originations is likely to fall sharply this year -- perhaps dropping one-third or more from the 2006 rate of slightly more than $ 600 billion .
MR. DUDLEY
I request a vote to ratify the operations conducted by the System Open Market Account since the January FOMC meeting .