FOMC/FOMC20070918meeting/FOMC20070918meeting--130.txt MR. MISHKIN The key point here is that we have a situation of potential nonlinearities , big tail risk , that could actually get very nasty , and in fact there is a potential for recession . FOMC/FOMC20070918meeting/FOMC20070918meeting--130.txt MR. MISHKIN Also , even in the modal forecast and not worrying about the downside risks , the expected future output gaps are more negative , so we have less pressure going forward there . FOMC/FOMC20070918meeting/FOMC20070918meeting--130.txt MR. MISHKIN There 's the episode of 1970 with the Penn Central crisis , there 's the 1987 stock market crash , there 's the 1998 LTCM episode , and then , of course , the World Trade Center terrorist tragedy in 2001 . FOMC/FOMC20070918meeting/FOMC20070918meeting--130.txt MR. MISHKIN However , the issue that most concerns me here is that , even though I think the modal forecast is that growth will be slower than we expected , the downside risk is actually very , very substantial . FOMC/FOMC20070918meeting/FOMC20070918meeting--130.txt MR. MISHKIN Therefore , it took quite a long time for them to fix their balance sheets in order to get players back into the financial markets to make loans to people who had good investment opportunities . FOMC/FOMC20070918meeting/FOMC20070918meeting--167.txt MS. DANKER `` The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output . FOMC/FOMC20070918meeting/FOMC20070918meeting--167.txt MS. DANKER Then : `` Developments in financial markets since the Committee 's last regular meeting have increased the uncertainty surrounding the economic outlook . FOMC/FOMC20070918meeting/FOMC20070918meeting--167.txt MS. DANKER To further its long-run objectives , the Committee in the immediate future seeks conditions in reserve markets consistent with reducing the federal funds rate to an average of around 4 3/4 percent . '' FOMC/FOMC20070918meeting/FOMC20070918meeting--167.txt MS. DANKER 165 , MS. DANKER. , '' I 'll be reading the directive from page 35 of the Bluebook , and the assessment of risks from the table distributed today . FOMC/FOMC20070321meeting/FOMC20070321meeting--183.txt MS. MINEHAN 181 , MS. MINEHAN. , '' I fully agree with Governor Kroszner 's idea that thinking that in this short form we can explain all of that is risky . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER We have a transition from a sort of cushion of the strong equity market offsetting the negative wealth effect in the housing market . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER Also , as Governor Warsh mentioned , there are more large private pools of capital to step in to bid for the LTCMs , if such things happen . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER But part of that volatility , as a number of people have expressed , is about concerns about what is going into those securities in the originate-to - distribute model . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER Although there are still upside risks to inflation , as Vice Chairman Geithner mentioned , overall we might want to think of moving a little more toward a greater balance of risk but still with a predominant concern for inflation . '' FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER But that caution with respect to investment and the slowing of the investment recovery make it harder to be optimistic about a rebound in productivity growth . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER There is also a lot of discussion of the amount of highly leveraged loans in the pipeline -- on the order of $ 300 billion . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER The major banks have very high , relative to historical trends , capital-to-asset ratios in excess of the required minimums . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER That is extremely important because the banking system can provide a critical automatic stabilizing mechanism , as it did in 1998 , when there are liquidity challenges . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER I share Governor Warsh 's concerns , not only from the point of view of the financial markets but also regarding the structure of mortgage markets -- that we may be seeing a little less of that kind of structure than we have seen in the past . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER There were some parallels to what we are seeing now : Risk spreads were rising very dramatically after a period of near-record low levels , and we saw the yields on Treasuries go down quite a bit because that 's where people were going . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER But with more uncertainty and more volatility , as Governor Warsh and others have mentioned , undoubtedly that is going to weigh heavily in the board room . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER I am not ready to go quite as far as the Greenbook has gone in marking down potential , but I do think that it is a real possibility , and it is very closely linked to my concerns about investment , which obviously the financial market volatility has affected . FOMC/FOMC20070807meeting/FOMC20070807meeting--102.txt MR. KROSZNER Basically , I would start taking my first steps , but just very first steps , a little more toward a balance of risk because of the greater downside to growth . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH First , on the diagnosis of exactly what 's going on in the financial markets , I do think that the deterioration of the financial markets since we last met has been quite remarkable and quite profound . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH I wo n't say that this is a liquidity problem and not a credit problem , but as I look at institutions with very different credit postures , these liquidity issues , these term funding issues , seem to be nonetheless apparent . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH In terms of the blurry line between our liquidity-provisioning roles and our credit - provisioning roles , I 'll admit that it is a hard distinction to maintain . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH We have a bit of a natural experiment on that by looking at a period a few months ago -- called a quarter-end -- that was n't much different from a year-end , at least among U.S. financial institutions . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH I buy the argument that in Europe the year-end funding pressures could be more significant because of the differences in disclosure and scrutiny around those two periods . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH They work in selling broad corporate debt issuance , and the dynamic of auctions and the competitive dynamic therein strike me as likely to be quite useful . FOMC/FOMC20071206confcall/FOMC20071206confcall--89.txt MR. WARSH I would expect there to be considerable bids if all goes well operationally , maybe 5 basis points above what we 've said is the reserve price , and so the hope is that this will be , in fact , a crowded auction .