fomc20090624material.pdf
TRANSCRIPT
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Appendix 1: Materials used by Mr. Sack
June 2324, 2009 202 of 261Authorized for Public Release
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0
1
2
3
4
0
1
2
3
4
1Y 2Y 3Y 5Y 7Y 10Y
PercentPercent
6/19/09 4/28/09
Page 1 of 7Class II FOMC Restricted FR
0.51.01.52.02.53.03.54.04.55.05.5
0.51.01.52.02.53.03.54.04.55.05.5
08/01/07 11/01/07 02/01/08 05/01/08 08/01/08 11/01/08 02/01/09 05/01/09
PercentPercent
2-Year5-Year10-Year30-Year
Apr29: FOMC
Source: Bloomberg
(1) Treasury YieldsAugust 1, 2007 June 19, 2009
0
1
2
3
4
5
0
1
2
3
4
5
08/01/08 11/01/08 02/01/09 05/01/09
PercentPercent
December 2009*
December 2010*
Source: Bloomberg
(2) Policy Expectations Implied by Futures Rates
August 1, 2008 June 19, 2009 (3) Treasury Yield Curve
Source: Bloomberg* Dec09 rate implied by Fed Funds contract, Dec10 rate implied by Eurodollar contract less 15-day moving average of forward Libor-Fed Funds Basis Swap
Improved economic outlook
Reduction in downside inflation risk
Increase in Treasury supply
Mortgage convexity hedging
Increase in upside inflation risk
(4) Factors Driving 10-Year Yield Change Over Intermeeting Period*
*Dealer responses aggregated to create average level of importance
Source: Dealer Policy Survey
Very Important
Important
Somewhat important
June 2324, 2009 203 of 261Authorized for Public Release
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Page 2 of 7Class II FOMC Restricted FR
0
250
500
750
1000
1250
0
250
500
750
1000
1250
12/1/08 3/1/09 6/1/09 9/1/09 12/1/09
$ Billions$ Billions
Agency-MBS
Treasury
Agency
Jun19
Source: Federal Reserve Bank of New York
(5) Large-Scale Asset Purchase Programs
December 2008 December 2009
0
5
10
15
20
25
30
35
0
1000
2000
3000
4000
5000
6000
7000
1/1/07 4/1/07 7/1/07 10/1/07 1/1/08 4/1/08 7/1/08 10/1/08 1/1/09 4/1/09
Percent$ Billions
SOMA Treasury Holdings (LHS)Other Treasury Securities Outstanding (LHS)SOMA as a Percent of Total (RHS)
Source: Federal Reserve Bank of New York
(7) Supply of Treasury Debt January 2007 June 2009
0
100
200
300
400
500
600
1
2
3
4
5
6
7
06/01/08 08/01/08 10/01/08 12/01/08 02/01/09 04/01/09 06/01/09
BPSPercent
Fannie CC (LHS)
Treasury* (LHS)
Fannie OAS (RHS)Jan5: First MBS Purchase
Nov25: Program Announcement Mar18: Program Expansion
Source: Bloomberg, JP Morgan Chase
(8) Mortgage and Treasury RatesJune 1, 2008 June 19, 2009
(6) Large-Scale Asset Purchase Programs
As of June 19
Source: Dealer Survey*Median response
*Treasury yield is blended 5- and 10-year yield
170 90 577
300 200 1250
2009 Q4 363 200 1200
2010 Q2 363 200 1250
Treasury AgencyAgency-
MBS
Purchases to Date
Announced Limit
Dealer Survey*:
June 2324, 2009 204 of 261Authorized for Public Release
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-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
08/01/07 12/01/07 04/01/08 08/01/08 12/01/08 04/01/09
PercentPercent
5Y Spot
5Y5Y Forward
Apr29: FOMC
0
5
10
15
20
25
30
35
40
0
5
10
15
20
25
30
35
40
1.0% 1.0-1.5% 1.5-2.0% 2.0-2.5% 2.5-3.0% 3.0%
PercentPercent
March
April
June
Page 3 of 7Class II FOMC Restricted FR
(9) Breakeven Inflation Rates August 1, 2007 June 19, 2009
Source: Barclays
(10) Probability Distribution of CPI Inflation Rate in 2014-2019
Source: Dealer Policy Survey
-200
-100
0
100
200
300
400
-200
-100
0
100
200
300
400
01/01/82 01/01/85 01/01/88 01/01/91 01/01/94 01/01/97 01/01/00 01/01/03 01/01/06 01/01/09
BPSBPS
NBER Recession
10-Year less Fed Funds
(11) Yield Curve Slope January 1, 1982 June 19, 2009
Source: Bloomberg
June 2324, 2009 205 of 261Authorized for Public Release
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0.00
0.05
0.10
0.15
0.20
25
50
75
100
125
06/01/08 08/01/08 10/01/08 12/01/08 02/01/09 04/01/09 06/01/09
PercentIndexed to 100= 6/9/06
S&P 500 (LHS)
Implied Skew (RHS)Apr29: FOMC
90
95
100
105
110
115
120
90
95
100
105
110
115
120
06/01/08 08/01/08 10/01/08 12/01/08 02/01/09 04/01/09 06/01/09
Indexed to 100= 1/1/08Indexed to 100= 1/1/08
Apr29: FOMC
100
200
300
400
500
600
700
800
900
250
500
750
1000
1250
1500
1750
2000
2250
06/01/08 08/01/08 10/01/08 12/01/08 02/01/09 04/01/09 06/01/09
BPSBPS
High Yield (LHS)
Investment Grade (RHS)
Apr29: FOMC
Page 4 of 7Class II FOMC Restricted FR
(13) Equity Prices June 1, 2008 June 19, 2009
*Implied skew is based on 90-day 25 delta put minus call
Source: Optionmetrics
(12) Corporate Debt Spreads June 1, 2008 June 19, 2009
Source: Bank of America
(14) US Trade-Weighted Dollar June 1, 2008 June 19, 2009
Source: Bloomberg
June 2324, 2009 206 of 261Authorized for Public Release
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0
50
100
150
200
250
300
350
400
0
50
100
150
200
250
300
350
400
01/01/07 05/01/07 09/01/07 01/01/08 05/01/08 09/01/08 01/01/09 05/01/09
BPSBPS
3-Month 12-MonthApr29: FOMC
Page 5 of 13Class II FOMC Restricted FR
(16) SCAP CapitalJanuary 29, 2009 June 19, 2009
Source: Federal Reserve Bank of New York Staff Estimates
40
60
80
100
120
140
40
60
80
100
120
140
12/31/08 01/31/09 03/03/09 04/03/09 05/03/09 06/03/09
Indexed to 100= 12/31/08Indexed to 100= 12/31/08
SCAP Banks Index
S&P 500
Feb25: SCAP announced
Apr24: SCAP white paper published
May7: SCAP results
Source: Bloomberg
(15) Equity Indices for Financial FirmsDecember 31, 2008 June 19, 2009
(17) US Libor-OIS Spreads January 1, 2007 June 19, 2009
Source: Bloomberg
0
5
10
15
20
25
30
35
BofA WellsFargo
GMAC Citi Region Sun MS Key FifthThird
PNC JPMC GS MetLife U.S.Bancorp
BoNYState St COF BBT Amex
$ Billions
0
5
10
15
20
25
30
35$ Billions
Capital Raised Capital Required
June 2324, 2009 207 of 261Authorized for Public Release
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0
250
500
750
1000
1250
1500
1750
0
250
500
750
1000
1250
1500
1750
08/01/08 10/01/08 12/01/08 02/01/09 04/01/09 06/01/09
$ Billions$ Billions
PCFPDCFAMLFCPFFFX SwapsTAF
Page 6 of 13Class II FOMC Restricted FR
Source: Federal Reserve Bank of New York
(18) Federal Reserve Short-Term Liquidity Facilities August 1, 2008 June 17, 2009
0
25
50
75
0
25
50
75
Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209*
$ Billions$ Billions
Non TALF-EligibleTALF-Eligible
*Data for Q209 includes issuance through June 10, 2009
Source: Federal Reserve Bank of New York, JP Morgan Chase
(19) ABS Issuance January 1, 2007 June 10, 2009
Source: JPMorgan Chase
(20) AAA-Rated Asset-Backed Spreads January 1, 2008 June 19, 2009
0
200
400
600
800
1000
1200
1400
0
200
400
600
800
1000
1200
1400
01/01/08 04/01/08 07/01/08 10/01/08 01/01/09 04/01/09
BPSBPS
3Y Prime Auto (LHS)3Y Credit Card CMBS Super Senior
Sep14: Lehman bankruptcy
Nov25: TALF announced
Mar19: First TALF Subscription
June 2324, 2009 208 of 261Authorized for Public Release
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Page 7 of 7Class II FOMC Restricted FR
Source: Federal Reserve Bank of New York
(21) Balance Sheet Assets by Category August 1, 2008 June 17, 2009
0
500
1000
1500
2000
2500
3000
0
500
1000
1500
2000
2500
3000
08/01/08 10/01/08 12/01/08 02/01/09 04/01/09 06/01/09
$ Billions$ Billions
All OtherLending to Systemically Important InstitutionsShort-Term Liquidity FacilitiesLarge-Scale Asset PurchasesLegacy Treasuries
June 2324, 2009 209 of 261Authorized for Public Release
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Appendix 2: Materials used by Mr. Carpenter
June 2324, 2009 210 of 261Authorized for Public Release
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Class I FOMC Restricted Controlled (FR)
Material for FOMC Briefing on Projections of the Balance Sheet, theMonetary Base, and Federal Reserve Income Seth Carpenter June 23, 2009
June 2324, 2009 211 of 261Authorized for Public Release
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Class I FOMC - Restricted Controlled (FR)
Exhibit 1: Individual Balance Sheet Item Profiles
Asset Purchases and Federal Reserve Liquidity and Credit Facilities
Temporary Holdings of Longer-term Treasuries Agency Debt
800 250
700 200 600
500 150
400
300 100
200 50 100
0 0 39783 40513 41244 41974 42705 39783 40513 41244 41974 42705
-- __ .. _
---- Aprllb..tlne .......... Apnleqrandedpurd!~a - CUrrent --- Aprl
AgencyMBS Primary and Secondary Credit
1400 100
1200 90
80 1000 70
800 60
50 600 ------ 40 400 30
20 200 10
0 0
39783 40513 41244 41974 42705 39783 40513 41244 41974 42705
- CUnont .... - c-a. __ ... _ Apt11
TAF Foreign Central Bank Liquidity Swaps
600 600
500 500
400 400
300 300
200 200
100 100
0 0
39783 40513 41244 41974 42705 39783 40513 41244 41974 42705
......... April - Currer-. .......... Apt11
Credit Extended to AIG Maiden Lanes
so 30 45 40
25
35 20 30 25 15
20 15
10
10
0 0
39783 40513 41244 41974 42705 39783 40513 41244 41974 42705
- "'"'"' ---- ..... -Miidlnta.LLC -PUden~IIU.C -MalcM!t.MIII UC
June 2324, 2009 212 of 261Authorized for Public Release
m1pmg01Typewritten Text*Corrected versions of these charts are available on page 248 of 261.
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Class I FOMC - Restricted Controlled (FR)
Exhibit 1: Individual Balance Sheet Item Profiles, continued
Federal Reserve Liquidity and Credit Facilities, continued
TALFv.l.O
1~ .---------------------------------------------,
120
100
80
60
40
20
0 ~~~~--~~~~--~~~~~--~~--~ 39783 40513 41244 41974 42705
-----
CPFF
400 ~----------------------------------------,
3SO
300
2SO
200
1SO
100
so 0 +---~--~~~~----r--.--r----~--~~~
39783 40513 41244 41974 42705
- cunent April
Federal Reserve Liabilities and Capital
Federal Reserve Notes
1400 .-----------------------------------------,
1200
1000
800
600
400
200
-
0 +-~~--~--~--.-,--.~--.-~~--~--~~
39783 ~S13 41244 41974 4270S
Capital
140 .-------------------------------------------,
120
100
80
60
~
20
0 +---~----~--~----~--~----~------~ 39783 40513 41244 41974 42705
-current ........... ~.-
TALF v 2.0/3.0
4SO ~--------------------------------------------~
400 ~-----3SO /
300 /
2SO /
200 ' I
1SO /
100 I I
I
I
I
, I
' \ . \ \ \ \ \
\ \
\ \
\ \
\ \
so ,' ........--- ""'---0 +-~~----~~~~--~--~~--~~~--~
39783 40513 41244 41974 42705
- current - - - April
AMLF
30 ,---------------------------------------~
2S
20
1S
39783 40513 41244 41974 42705
- Cnent ----
TGA andSFP
39783 40513 41244 41974 42705
-currentTGA ----AprtiTGA -CUrrent:SfP ApriiSFP
Reserve Balances 3000 .-------------------------------------------~
39783 40513 41244 41974 42705
- ..... ~ -Expanded purchases ............ ..,. buelrw ---- Aprl expanded purchases
June 2324, 2009 213 of 261Authorized for Public Release
m1pmg01Typewritten Text*Corrected versions of these charts are available on page 249 of 261.
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Class I FOMC - Restricted Controlled (FR) Exhibit 2: Baseline Balance Sheet Projections
Federal Reserve Assets
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Treasury securities Repurchase agreements
TALF
Agency debt TAF Other loans and facilities
AgencyMBS Central bank swaps
Other assets
Federal Reserve Liabilities and Capital
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Federal Reserve notes Reverse repurchase agreements Deposits, other than reserve balances Reserve balances Other liabilities Capital
3,500
3,000
2,500
2,000 Ill c .2 iii
1,500 11).
1,000
500
0
3,500
3,000
2,500
2,000 Ill c .2
1,500 iii 11).
1,000
500
0
June 2324, 2009 214 of 261Authorized for Public Release
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Class I FOMC- Restricted Controlled (FR) Exhibit 3: Expanded Balance Sheet Projections
2006 2007 2008 2009 Treasury securities Repurchase agreements TALF
Federal Reserve Assets
2010 2011 2012 2013 Agency debt TAF Other loans and facilities
2014 2015 2016 AgencyMBS
Central bank swaps Other assets
Federal Reserve Liabilities and Capital
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 federal Reserve notes Reverse repurchase agreements Deposits, other than reserve balances Reserve balances Other liabilities Capital
3,500
3,000
2,500
2,000 Ill c .2 iii
1,500 11).
1,000
500
0
3,500
3,000
2,500
2,000 Ill c .2
1,500 iii 11).
1,000
500
0
June 2324, 2009 215 of 261Authorized for Public Release
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Class I FOMC - Restricted Controlled (FR)
Exhibit 4
Growth Rates for Monetary Base
Date Baseline Expanded April Purchases Baseline
Percent, annual rate Monthly
Jun-09 -52.1 -52.1 60.2
Jul-09 -0.4 -0.4 131.9 Aug-09 99.3 99.3 133.9 Sep-09 97.3 97.3 120.5 Oct-09 103.1 148.3 98.1 Nov-09 95.7 173.1 79.9 Dec-09 102.1 163.8 71.1
Quarterly Q2 2009 24.9 24.9 38.4 Q3 2009 22.7 22.7 111.9 Q4 2009 108.2 157.0 107.3 Q1 2010 48.0 78.6 26.2 Q2 2010 -7.1 -6.7 -17.2 Q3 2010 -15.6 -14.0 -17.9 Q4 2010 -19.0 -16.9 -18.8
Annual - period average 2009 92.5 98.2 120.3 2010 32.5 51.3 34.4 2011 -11.1 -10.0 -14.1 2012 -9.0 -10.0 -14.4 2013 -12.4 -14.2 -25.0 2014 -9.3 -11.2 -19.7 2015 -9.2 -10.3 -14.8
2016 -7.7 -10.2 2.3
Note: Not seasonally adjusted
June 2324, 2009 216 of 261Authorized for Public Release
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Baseline
2008 2009
Market based
Total Expenses
Class I FOMC - Restricted Controlled (FR)
Exhibit 5 Projected Federal Reserve Net Income
$Billions Baseline
170
150
Net Income Prior to Dist. 130 Dividends, Transfers, etc. Remittance
- Gross Income 110 - Net Income Prior to Dist.
2010 2011 2012 2013 2014 2015 2016
$Billions
Total Expenses Net Income Prior to Dist.
- Gross Income
90
70
50
30
10
-10 2008 2009
Market based
170
150
130
110
90
70
50
30
10
-10
2010 2011 2012 2013 2014
Dividends, Transfers, etc. Remittance
- Net Income Prior to Dist.
$Billions
2015 2016
$Billions
2008 2009 2010 2011 2012 2013 2014 2015 2016 2008 2009 2010 2011 2012 2013 2014 2015 2016
High interest rate $Billions
170
150 Total Expenses Net Income Prior to Dist.
130
110
90
70
50
30
10
-10 2008 2009 2010 2011 2012 2013 2014 2015 2016
High interest rate
Dividends, Transfers, etc. Remittance
- Net Income Prior to Dist.
$Billions
2008 2009 2010 2011 2012 2013 2014 2015 2016
170
150
130
110
90
70
50
30
10
-10
170
150
130
110
90
70
50
30
10
-10
170
150
130
110
90
70
50
30
10
-10
June 2324, 2009 217 of 261Authorized for Public Release
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2009
Class I FOMC - Restricted Controlled (FR)
Exhibit 6 Projected Mark-to-Market Losses on tle SOMA Potlfol io
High interest Irate Mdi'o\.et based Baselil'le
2010 2011 2012 2013 2014 2015
$Billions 400
350
300
250
200
150
100
50
0
-50
2016
June 2324, 2009 218 of 261Authorized for Public Release
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Appendix 3: Materials used by Mr. English
June 2324, 2009 219 of 261Authorized for Public Release
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Class II FOMC Restricted (FR) Material for FOMC Briefing on Possible Effects of Very High Reserve Balances on Bank Balance Sheets Bill English June 23, 2009
June 2324, 2009 220 of 261Authorized for Public Release
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Exhibit 1
Reserve Balances and Regulatory Leverage Ratios
Leverage Ratio Projections
Class II FOMC - Restricted (FR) 6/23/2009
0
400
800
1200
1600
2000
2400Billions of dollars
Source. Federal Reserve and staff estimates.
2008 2009 2010
Quarterly average
Reserve balances of depository institutions
Baseline
Alternative
proj.
Definition:
Ratio > 5.0 for a well capitalizedbank
Tier 1 capitalAverage total assets
Regulatory leverage ratio
Reserve balances expand in linewith Bluebook scenarios
Other assets unchanged
Tier 1 capital declines
Projection assumptionsBillions of dollars
2009:Q1 2010:Q1
Tier 1 capital 836 790
Reserve balances 491 982
Average total assets 10,811 11,302
Leverage ratio(aggregate; percent)
7.73 6.99
Actual Projected
Baseline results
Note. Baseline scenario without any capital downstreamed tobanks after 2009:Q1. All commercial banks with reservebalances.Source. Call Reports and staff estimates.
1999 2001 2003 2005 2007 20095.5
6.0
6.5
7.0
7.5
8.0Percent
Quarterly
Aggregate leverage ratio of commercialbanks with reserve balances
* Assumes that all capital raised as a result of the SCAP isdownstreamed to subsidiary banks.Source. Call Reports and staff estimates.
NBERPeak
Baseline
Alternative
Baselinew/ K*
Alternativew/ K*
Broadly similar results for BHCs
Leverage ratios for some individualbanks could fall to low levels relativeto regulatory norms
Individual institutions can takesteps to reduce unwantedreserves
Other results
June 2324, 2009 221 of 261Authorized for Public Release
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Exhibit 2
Qualitative Information and Policy Options
Class II FOMC - Restricted (FR) 6/23/2009
Banking organizations have not expressed material concerns about their reservebalances
Some banks have maintained high levels of reserve balances as a liquidity buffer
Some banks have profited by exploiting the spread between the rate paid onexcess reserves and the cost of borrowing
Banks thought that they could reduce their reserve balances if they chose
Banking organizations have not discussed with System staff the possible effectsof increased systemwide reserves
Information from consultations with Federal Reserve System staff
Depository institutions should not besignificantly adversely affected bythe anticipated levels of reservebalances
No policy response appearsnecessary at this time
Considerable uncertainty remains
Staff will continue to monitor theimpact on depository institutions
Summary
Option 1: Drain reserves
Option 2: Exclude reserve balancesfrom leverage ratio for all bankinginstitutions
Option 3: Exclude reserve balancesfrom leverage ratio for selectedbanking institutions
Option 4: Issue supervisoryguidance
Policy options
June 2324, 2009 222 of 261Authorized for Public Release
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Appendix 4: Materials used by Messrs. Clouse and Hilton
June 2324, 2009 223 of 261Authorized for Public Release
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Class I FOMC Restricted-Controlled (FR)
Material for
FOMC Briefing on Reserve Management Tools to Target a Higher Policy Rate
Jim Clouse Spence Hilton June 23, 2009
June 2324, 2009 224 of 261Authorized for Public Release
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Actual DemandCurve
IOER
Reserve Balances
Funds Rate
Actual DemandCurve
IOER
Reserve Balances
Funds Rate
IOER
Reserve Balances
Funds Rate
IOER
Reserve Balances
Funds Rate
Reserve Market
Demand Side Tools
IOER
Reserve Balances
Funds Rate
IOER
Reserve Balances
Funds Rate
Exhibit 1
Supply Side Tools
Fed BillsTerm DepositsReverse RPsSupplementary Financing ProgramAsset SalesScaled Back Liquidity Programs
Interest on GSE balancesCollateralized Funds Transactions
Reserve Supply
Reserve Supply
Reserve Supply
Hypothetical Demand Curve
Increase Reserve RequirementsVoluntary Reserve Requirements
Demand Shifting
Demand Flattening
June 2324, 2009 225 of 261Authorized for Public Release
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Appendix 5: Materials used by Mr. Madigan
June 2324, 2009 226 of 261Authorized for Public Release
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Class I FOMC Restricted Controlled (FR)
Material for Briefing on Staff Proposal Regarding Liquidity Facilities Brian Madigan June 23, 2009
June 2324, 2009 227 of 261Authorized for Public Release
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June 23, 2009
Staff Proposal for Extension of and Modifications to Various Liquidity Facilities
13(3)i Extendii Near-term Modification Longer-term Proposal Depository institution facilities 1. Primary credit NA None Increase spread, eliminate term loans 2. TAF NA 1. Reduce auction amounts to $125 billion
2. Optionally, raise minimum bid rate One small monthly or quarterly auction
3. Foreign currency swaps
T None Allow to expire on 2/1/10, but study possible longer-term facility
Primary dealer facilities 4. PDCF T T Increase haircuts for most types of
investment-grade and noninvestment-grade collateral
1. Later this year, restrict collateral to investment-grade 2. Allow to expire on 2/1/10
5. TSLF T T 1. Suspend Schedule 1 auctions 2. Offer $75 billion of Schedule 2 monthly 3. Terminate TOP auctions
Allow to expire on 2/1/10
Specific market and institution facilities6. AMLF T T Require that ABCP pledged as collateral
has been purchased from a money fund experiencing material redemptions.
Allow to expire on 2/1/10
7. CPFF T T None Allow to expire on 2/1/10 8. MMIFF T None Allow to expire on 10/30/09 9. TALF T None 10. GSE facilityiii NA None Rescind
NAnot applicable. i Relies on Section13(3) authority. ii Extend facility to February 1, 2010. iii GSE facility was approved under Section 13(13) of the Federal Reserve Act.
June 2324, 2009 228 of 261Authorized for Public Release
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Appendix 6: Materials used by Messrs. Kiley and Sheets
June 2324, 2009 229 of 261Authorized for Public Release
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June 2324, 2009 230 of 261Authorized for Public Release
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June 2324, 2009 231 of 261Authorized for Public Release
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June 2324, 2009 232 of 261Authorized for Public Release
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June 2324, 2009 233 of 261Authorized for Public Release
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June 2324, 2009 234 of 261Authorized for Public Release
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Class II FOMC - Restricted (FR) Exhibit 6
The Dollar and Financial Markets
75
80
85
90
95
100
105
2002 2004 2006 2008 2010
Broad Real DollarIndex, Jan. 2002 = 100
Monthly
75
80
85
90
95
100
105
Mar Apr May Jun
EME Exchange RatesIndex, Mar. 2, 2009 = 100
Weekly
KoreaBrazil
Mexico
Thailand
Russia
Apr.FOMC
75
80
85
90
95
100
105
Mar Apr May Jun
AFE Exchange RatesIndex, Mar. 2, 2009 = 100
Weekly
UnitedKingdom
Euro area
Japan
Canada
Apr.FOMC
30
40
50
60
70
80
90
100 110
Jul Sep Nov Jan Mar May Jul
Equity PricesIndex, Jun. 3, 2008 = 100
Weekly
2008 2009
Emergingmarkets
UnitedKingdom
EuroareaJapan
0
100
200
300
400
500
600
700
2007 2008 2009
BBB Corporate SpreadsBasis points
Weekly
United States
UnitedKingdom
Euro area
Japan
0
50
100
150
200
250
300
2007 2008 2009 2010
Baltic Dry IndexIndex, Jan. 2, 2007 = 100
Daily
Average 2003-2008
20
40
60
80
100
120
140
2007 2008 2009 201060
80
100
120
140
Commodity PricesDollars per barrelIndex, Jan. 2007 = 100
Monthly
WTI oil
Nonfuelcommodities
June 2324, 2009 235 of 261Authorized for Public Release
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Class II FOMC - Restricted (FR) Exhibit 7
1
2
3
4
5
6
2008 2009
10-Year Government BondsPercent
Weekly
Other Explanations for Recent Dollar Movements
U.S. External Sector
Germany
Japan
UnitedStates
UnitedKingdom
0
25
50
75
100
125
150
175
Jan Mar May
Five-Year Sovereign CDS PremiumsBasis points
Daily
2009
GermanyJapan
UnitedStates
UnitedKingdom
-9
-8
-7
-6
-5
-4
-3
-2
2006 2008 2010-900
-800
-700
-600
-500
-400
-300
-200
Current AccountPercent of GDPBillions of dollars
-10
-8
-6
-4
-2
0
2
4
Real GDPPercent change, a.r.*
Total foreignUnited States
2008 2009 2010Q4 Q1 Q2 H2
quarter of period indicated.* Change from final quarter of preceding period to final
-6
-5
-4
-3
-2
-1
2006 2008 2010-600
-500
-400
-300
-200
-100
Oil Import BalancePercent of GDPBillions of dollars
Trade in Real Goods and Services
2008 2009 2010p
Q1-Q3 Q4 Q1e Q2p H2p
Contribution to Real GDP Growth (percentage points, a.r.*)
1. Net Exports 1.6 -0.1 2.1 1.1 -0.6 -0.3
Growth Rates (percent, a.r.*)
2. Imports -3.9 -17.5 -36.3 -12.2 6.7 5.3
3. Exports 6.7 -23.6 -30.6 -5.4 3.0 4.0
* Change from final quarter of preceding period to final quarter of period indicated.
June 2324, 2009 236 of 261Authorized for Public Release
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Class II FOMC - Restricted (FR) Exhibit 8
Outlook for Growth in the Advanced Foreign Economies
-8
-6
-4
-2
0
2
2008 2009 2010
Output GapsPercent*
AFE
U.S.
* Deviation from potential GDP.
2
4
6
8
10
12
2007 2008 2009 2010 2011
Unemployment Rate*Percent
U.S.
U.K.
Euroarea
Japan
* Greenbook forecast for U.S.; forecasts fromsimple regression for others.
25
30
35
40
45
50
55
60
2007 2008 2009
Purchasing Managers Indexes*Diffusion index
U.K.
Euroarea
Japan
May
Jun.
May
* Total economy PMIs. Latest value for euro area is flash estimate.
-1.2
-0.8
-0.4
-0.0
0.4
0.8
1.2
1.6
2.0
2009 2010
Contributions of Fiscal StimulusPercentage points, Q4/Q4
JapanU.K.Euro areaU.S.
Source: Staff estimates.
-9
-6
-3
0
3
6
9
2007 2008 2009
Retail Sales Volume12-month percent change
U.K.
Euroarea
Japan*
May
Apr.
* Monthly real consumption.
Real GDP* Percent change, annual rate**
2008 2009 2010pQ4 Q1e Q2p H2p
1. Total Foreign -7.3 -8.6 -1.4 1.7 3.1 2. April Greenbook -7.3 -7.2 -2.4 0.8 2.8
3. Advanced Foreign Economies -6.0 -7.6 -2.2 0.3 1.9 4. Japan -13.5 -14.2 0.3 0.5 1.5 5. Euro area -6.8 -9.7 -3.0 -0.5 1.6 6. United Kingdom -6.1 -7.3 -0.9 0.8 1.8 7. Canada -3.7 -5.4 -2.8 0.7 2.3
* GDP aggregates weighted by shares of U.S. merchandise exports.** Change from final quarter of preceding period to final quarter of period indicated.
June 2324, 2009 237 of 261Authorized for Public Release
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Class II FOMC - Restricted (FR) Exhibit 9 (Last)
Outlook for Growth in the Emerging Market Economies
-60
-40
-20
0
20
40
60
80
2004 2005 2006 2007 2008 2009
Imports and Electricity ProductionPercent change, s.a.a.r.
Quarterly
Imports**
Electricityproduction
Q2*
* Average of April and May at annual rate.** Source: Haver Analytics. In nominal U.S. dollars.
0
10
20
30
40
2007 2008 200930
40
50
60
70
Recent Indicators12-month percent changeDiffusion index
China
Investment*
Retail salesvolume PMI
May
* Staff estimate from year to date figures.
70
80
90
100
110
120
2007 2008 2009
Industrial ProductionIndex, Jan. 2007 = 100
Taiwan
Brazil
Mexico
Korea
Apr.
35
40
45
50
55
60
65
2007 2008 2009
Purchasing Managers Indexes*Diffusion index
Other Emerging Market Economies
Brazil
India
Singapore
May
* Manufacturing sector.
70
80
90
100
110
120
130
140
150
2007 2008 2009
ExportsIndex, Jan. 2007 = 100
Mexico
Korea
Singapore
May
Apr.
May
Real GDP* Percent change, annual rate**
2008 2009 2010pQ4 Q1e Q2p H2p
1. Emerging Market Economies -8.8 -9.8 -0.4 3.4 4.5 2. China 1.6 6.5 7.0 7.7 8.9 3. Other Emerging Asia -14.0 -6.6 0.6 2.1 4.4 4. Mexico -9.8 -21.5 -5.2 3.7 3.4 5. Other Latin America -7.4 -5.0 -0.0 1.9 3.0
* GDP aggregates weighted by shares of U.S. merchandise exports.** Change from final quarter of preceding period to final quarter of period indicated.
June 2324, 2009 238 of 261Authorized for Public Release
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Appendix 7: Materials used by Mr. Madigan
June 2324, 2009 239 of 261Authorized for Public Release
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Class I FOMC Restricted Controlled (FR)
Material for Briefing on FOMC Participants Economic Projections Brian Madigan June 23-24, 2009
June 2324, 2009 240 of 261Authorized for Public Release
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2009 2010 2011 Longer Run 2009 2010 2011 Longer Run
Change in real GDP (Q4/Q4)June projection. . . . . . . . . . . . -1.5 to -1.0 2.1 to 3.3 3.8 to 4.6 2.5 to 2.7 -2.0 to -0.6 0.8 to 4.0 2.3 to 5.0 2.4 to 2.8
April projection. . . . . . . . . . -2.0 to -1.3 2.0 to 3.0 3.5 to 4.8 2.5 to 2.7 -2.5 to -0.5 1.5 to 4.0 2.3 to 5.0 2.4 to 3.0Memo: June Greenbook. . . . . -1.1 3.0 4.8 2.5
Unemployment rate (Q4)June projection. . . . . . . . . . . . 9.8 to 10.1 9.5 to 9.8 8.4 to 8.8 4.8 to 5.0 9.7 to 10.5 8.5 to 10.6 6.8 to 9.2 4.5 to 6.0
Variable Central tendency Range
Exhibit 1. Economic Projections of Federal Reserve Governors and Reserve Bank Presidents, June 2009(Percent)
June projection. . . . . . . . . . . . 9.8 to 10.1 9.5 to 9.8 8.4 to 8.8 4.8 to 5.0 9.7 to 10.5 8.5 to 10.6 6.8 to 9.2 4.5 to 6.0April projection. . . . . . . . . . 9.2 to 9.6 9.0 to 9.5 7.7 to 8.5 4.8 to 5.0 9.1 to 10.0 8.0 to 9.6 6.5 to 9.0 4.5 to 5.3
Memo: June Greenbook. . . . . 10.0 9.7 8.0 5.0
PCE inflation (Q4/Q4)PCE inflation. . . . . . . . . . . . . . 1.0 to 1.4 1.2 to 1.8 1.1 to 2.0 1.7 to 2.0 1.0 to 1.8 0.9 to 2.0 0.5 to 2.5 1.5 to 2.1
April projection. . . . . . . . . . 0.6 to 0.9 1.0 to 1.6 1.0 to 1.9 1.7 to 2.0 -0.5 to 1.2 0.7 to 2.0 0.5 to 2.5 1.5 to 2.0Memo: June Greenbook. . . . . 1.4 1.1 1.2 2.0
Core PCE inflation (Q4/Q4)Core PCE inflation. . . . . . . . . 1.3 to 1.6 1.0 to 1.5 0.9 to 1.7 1.2 to 2.0 0.5 to 2.0 0.2 to 2.5
April projection. . . . . . . . . . 1.0 to 1.5 0.7 to 1.3 0.8 to 1.6 0.7 to 1.6 0.5 to 2.0 0.2 to 2.5Memo: June Greenbook. . . . . 1.4 0.8 0.7
June 2324, 2009 241 of 261Authorized for Public Release
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2
4
6
8
10
12
14
16
18
Number of participants
Exhibit 2. Risks and Uncertainty in Economic Projections
Uncertainty about GDP Growth
April projections
Lower Similar Higher
June projections
2
4
6
8
10
12
14
16
18
Number of participants
Uncertainty about PCE Inflation
Lower Similar Higher
2
4
6
8
10
12
14
16
18
Number of participants
Risks to GDP Growth
April projections
Downside Balanced Upside
June projections
2
4
6
8
10
12
14
16
18
Number of participants
Risks to PCE Inflation
Downside Balanced Upside
June 2324, 2009 242 of 261Authorized for Public Release
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Appendix 8: Materials used by Mr. Stockton
June 2324, 2009 243 of 261Authorized for Public Release
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Orders and Shipments of Durable Goods(Percent change from comparable previous period,
seasonally adjusted)
2008 2009 2009
Category Q3 Q4 Q1 Mar. Apr.r Maya
Annual rate Monthly rate
Nondefense capital goodsOrders -14.0 -49.9 -49.1 -1.0 -2.9 10.0 Aircraft -66.3 -99.5 -100.0 102.3 -6.4 630.5 Excluding aircraft -5.2 -36.5 -44.2 -1.4 -2.9 4.8 Computers and peripherals -36.6 -20.8 -18.4 -4.6 -6.6 9.4 Communications equipment 16.7 -28.7 -58.7 7.8 -4.7 6.0 All other -3.5 -38.4 -44.7 -1.9 -2.3 4.2
Shipments -.8 -19.8 -28.1 -.9 -2.6 -.3 Aircraft -8.0 -65.3 233.3 9.4 -1.5 -7.6 Excluding aircraft -.3 -15.5 -35.4 -1.7 -2.7 .3 Computers and peripherals -28.7 -25.3 -.8 -2.8 -1.4 1.6 Communications equipment -10.7 -16.6 -47.3 3.0 -4.2 -2.4 All other 4.0 -14.4 -36.7 -1.9 -2.7 .4
Supplementary orders seriesDurable goods -8.1 -45.2 -39.0 -2.2 1.8 1.8 Real adjusted durable goods -13.0 -45.2 -36.3 -1.3 .7 2.0
Capital goods -10.3 -47.3 -47.2 -2.6 1.7 9.5 Nondefense -14.0 -49.9 -49.1 -1.0 -2.9 10.0 Defense 20.3 -26.7 -33.9 -11.1 28.5 7.4
r Revised. a Advance. Source: Census Bureau.
2000 2002 2004 2006 20083
4
5
6
7
8
9
10
11
12
3
4
5
6
7
8
9
10
11
12
Computers and Peripherals
Billions of dollars, ratio scale
May
ShipmentsOrders
Source: Census Bureau.
2000 2002 2004 2006 20082
4
6
8
10
12
14
16
2
4
6
8
10
12
14
16
Communications Equipment
Billions of dollars, ratio scale
Source: Census Bureau.
2000 2002 2004 2006 200835
37
39
41
43
45
47
49
51
53
55
58
35
37
39
41
43
45
47
49
51
53
55
58
Other (non-high-tech, nontransportation)
Billions of dollars, ratio scale
Source: Census Bureau.
June 2324, 2009 244 of 261Authorized for Public Release
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Durable Goods Manufacturing
2002 2003 2004 2005 2006 2007 2008 2009-6
-5
-4
-3
-2
-1
0
1
2
3
4
-6
-5
-4
-3
-2
-1
0
1
2
3
4 Percent
May
Source: Calculated by FRB staff.
Real Adjusted Durable Goods Orders (3-month moving average)
1996 1998 2000 2002 2004 2006 2008 20101.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0Months supply
May
Source: Census Bureau.
Inventory-Shipments Ratio at Durable Goods Manufacturers
Change in Inventories at Durable Goods Manufacturers (book value, billions of dollars at annual rate)
2008 2009 2009
Q2 Q3 Q4 Q1 Feb. Mar. Apr. May
Durable goods 24.2 26.4 15.0 -56.0 -54.9 -68.4 -44.8 -29.7 Lumber and wood prod. -.6 1.1 -1.3 .3 -1.6 2.5 -3.1 -2.8 Nonmetalic mineral prod. -.4 .6 -.4 -1.2 -1.8 -1.8 -1.5 -.5 Primary metals 7.3 6.6 -12.1 -12.6 -13.4 -14.0 -12.5 -10.2 Fabricated metals 4.4 5.6 -2.8 -11.4 -10.0 -15.0 -11.6 -6.4 Machinery 1.2 3.1 2.5 -8.4 -10.1 -15.3 -8.5 -4.3 Computer and electronic prod. 1.2 2.7 3.5 -6.4 -2.6 -8.4 -2.7 1.2 Electrical equipment .5 .5 -2.5 -4.2 -4.6 -2.0 -2.9 -1.5 Transportation equipment 9.9 5.1 27.7 -9.2 -5.8 -11.3 3.4 -3.8 Motor vehicles -1.3 -3.2 -4.7 -7.8 -6.2 -8.1 -5.5 -4.1 Aircraft & parts 10.9 9.0 31.1 -1.8 -.9 -1.5 8.7 -.6 Furniture -.4 -.1 -1.0 -2.2 -3.1 -2.2 -2.7 -1.5 Other durables 1.0 1.1 1.3 -.9 -1.8 -1.1 -2.9 .1
Memo: Inventory-shipments ratio, durable goods 1.57 1.61 1.76 1.86 1.88 1.89 1.88 1.90
Source: Census Bureau.
June 2324, 2009 245 of 261Authorized for Public Release
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Appendix 9: Materials used by Mr. Carpenter (corrected)*
June 2324, 2009 246 of 261Authorized for Public Release
m1pmg01Typewritten Text
m1pmg01Typewritten Text*As indicated by Mr. Madigan on page 165 of 261
m1pmg01Typewritten Text
m1pmg01Typewritten Text
m1pmg01Typewritten Text
m1pmg01Typewritten Text
-
Class I FOMC Restricted Controlled (FR)
Material for FOMC Briefing on Projections of the Balance Sheet, theMonetary Base, and Federal Reserve Income Seth Carpenter June 23, 2009
June 2324, 2009 247 of 261Authorized for Public Release
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AssetPurchasesandFederalReserveLiquidityandCreditFacilities
Exhibit1:IndividualBalanceSheetItemProfilesCORRECTED
0
100
200
300
400
500
600
700
800
Dec08 Dec10 Dec12 Dec14 Dec16
TemporaryHoldingsofLongertermTreasuries
Baseline Expandedpurchases Aprilbaseline Aprilexpandedpurchases
0
50
100
150
200
250
Dec08 Dec10 Dec12 Dec14 Dec16
AgencyDebt
Current April
0
200
400
600
800
1000
1200
1400
Dec08 Dec10 Dec12 Dec14 Dec16
AgencyMBS
Current April
0102030405060708090
100
Dec08 Dec10 Dec12 Dec14 Dec16
PrimaryandSecondaryCredit
Current April
0
100
200
300
400
500
600
700
800
Dec08 Dec10 Dec12 Dec14 Dec16
TemporaryHoldingsofLongertermTreasuries
Baseline Expandedpurchases Aprilbaseline Aprilexpandedpurchases
0
50
100
150
200
250
Dec08 Dec10 Dec12 Dec14 Dec16
AgencyDebt
Current April
0
200
400
600
800
1000
1200
1400
Dec08 Dec10 Dec12 Dec14 Dec16
AgencyMBS
Current April
0
100
200
300
400
500
600
Dec08 Dec10 Dec12 Dec14 Dec16
ForeignCentralBankLiquiditySwaps
Current April
0
100
200
300
400
500
600
Dec08 Dec10 Dec12 Dec14 Dec16
TAF
Current April
05
101520253035404550
Dec08 Dec10 Dec12 Dec14 Dec16
CreditExtendedtoAIG
Current April
0
5
10
15
20
25
30
Dec08 Dec10 Dec12 Dec14 Dec16
MaidenLanes
MaidenLaneLLC MaidenLaneIILLC MaidenLaneIIILLC
0102030405060708090
100
Dec08 Dec10 Dec12 Dec14 Dec16
PrimaryandSecondaryCredit
Current April
June 2324, 2009 248 of 261Authorized for Public Release
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FederalReserveLiquidityandCreditFacilities,continued
Exhibit1:IndividualBalanceSheetItemProfiles,continuedCORRECTED
0
5
10
15
20
25
30
AMLF
0
50
100
150
200
250
300
350
400
CPFF
0
20
40
60
80
100
120
140
Dec08 Dec10 Dec12 Dec14 Dec16
TALFv.1.0
Current April
0
50
100
150
200
250
300
350
400
450
Dec08 Dec10 Dec12 Dec14 Dec16
TALFv2.0/3.0
Current April
FederalReserveLiabilitiesandCapital
0
5
10
15
20
25
30
Dec08 Dec10 Dec12 Dec14 Dec16
AMLF
Current April
0
50
100
150
200
250
300
350
400
Dec08 Dec10 Dec12 Dec14 Dec16
CPFF
Current April
0
20
40
60
80
100
120
140
Dec08 Dec10 Dec12 Dec14 Dec16
TALFv.1.0
Current April
0
50
100
150
200
250
300
350
400
450
Dec08 Dec10 Dec12 Dec14 Dec16
TALFv2.0/3.0
Current April
0
50
100
150
200
250
300
Dec08 Dec10 Dec12 Dec14 Dec16
TGAandSFP
CurrentTGA AprilTGA CurrentSFP AprilSFP
0
500
1000
1500
2000
2500
3000
Dec08 Dec10 Dec12 Dec14 Dec16
ReserveBalances
Baseline Expandedpurchases Aprilbaseline Aprilexpandedpurchases
0
20
40
60
80
100
120
140
Dec08 Dec10 Dec12 Dec14 Dec16
Capital
Current April
0
200
400
600
800
1000
1200
1400
Dec08 Dec10 Dec12 Dec14 Dec16
FederalReserveNotes
June 2324, 2009 249 of 261Authorized for Public Release
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Exhibit2:BaselineBalanceSheetProjections
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$Billion
s
FederalReserveLiabilitiesandCapital
FederalReservenotes ReverserepurchaseagreementsDeposits,otherthanreservebalances ReservebalancesOtherliabilities Capital
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$Billion
s
FederalReserveAssets
Treasurysecurities Agencydebt AgencyMBSRepurchaseagreements TAF CentralbankswapsTALF Otherloansandfacilities Otherassets
June 2324, 2009 250 of 261Authorized for Public Release
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Exhibit3:ExpandedBalanceSheetProjections
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$Billion
s
FederalReserveAssets
Treasurysecurities Agencydebt AgencyMBSRepurchaseagreements TAF CentralbankswapsTALF Otherloansandfacilities Otherassets
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$Billion
s
FederalReserveLiabilitiesandCapital
FederalReservenotes ReverserepurchaseagreementsDeposits,otherthanreservebalances ReservebalancesOtherliabilities Capital
June 2324, 2009 251 of 261Authorized for Public Release
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Date Baseline Expanded PurchasesApril
Baseline
MonthlyJun-09 -52.1 -52.1 60.2Jul-09 -0.4 -0.4 131.9
Aug-09 99.3 99.3 133.9Sep-09 97.3 97.3 120.5Oct-09 103.1 148.3 98.1Nov-09 95.7 173.1 79.9Dec-09 102.1 163.8 71.1
Q2 2009 24.9 24.9 38.4
Growth Rates for Monetary Base
Percent, annual rate
Quarterly
Exhibit4
QQ3 2009 22.7 22.7 111.9Q4 2009 108.2 157.0 107.3Q1 2010 48.0 78.6 26.2Q2 2010 -7.1 -6.7 -17.2Q3 2010 -15.6 -14.0 -17.9Q4 2010 -19.0 -16.9 -18.8
2009 92.5 98.2 120.32010 32.5 51.3 34.42011 -11.1 -10.0 -14.12012 -9.0 -10.0 -14.42013 -12.4 -14.2 -25.02014 -9.3 -11.2 -19.72015 -9.2 -10.3 -14.82016 -7.7 -10.2 2.3
Annual - period average
Note: Not seasonally adjusted
June 2324, 2009 252 of 261Authorized for Public Release
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Exhibit 5Projected Federal Reserve Net Income
2008 2009 2010 2011 2012 2013 2014 2015 2016 -10
10
30
50
70
90
110
130
150
170
$Billions
Gross Income
Baseline
Annual
Total ExpensesNet Income Prior to Dist.
2008 2009 2010 2011 2012 2013 2014 2015 2016 -10
10
30
50
70
90
110
130
150
170
$Billions
Net Income Prior to Dist.
Baseline
Annual
Dividends, Transfers, etc.Remittance
2008 2009 2010 2011 2012 2013 2014 2015 2016 -10
10
30
50
70
90
110
130
150
170
$Billions
Gross Income
Market based
Annual
Total ExpensesNet Income Prior to Dist.
2008 2009 2010 2011 2012 2013 2014 2015 2016 -10
10
30
50
70
90
110
130
150
170
$Billions
Net Income Prior to Dist.
Market based
Annual
Dividends, Transfers, etc.Remittance
2008 2009 2010 2011 2012 2013 2014 2015 2016 -10
10
30
50
70
90
110
130
150
170
$Billions
Gross Income
High interest rate
AnnualTotal ExpensesNet Income Prior to Dist.
2008 2009 2010 2011 2012 2013 2014 2015 2016 -10
10
30
50
70
90
110
130
150
170
$Billions
Net Income Prior to Dist.
High interest rate
Annual
Dividends, Transfers, etc.Remittance
June 2324, 2009 253 of 261Authorized for Public Release
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2009 2010 2011 2012 2013 2014 2015 2016
-50
0
50
100
150
200
250
300
350
400$Billions
High interest rateMarket basedBaseline
Annual
Exhibit 6Projected Mark-to-Market Losses on the SOMA Portfolio
June 2324, 2009 254 of 261Authorized for Public Release
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Appendix 10: Materials used by Mr. Madigan
June 2324, 2009 255 of 261Authorized for Public Release
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Class I FOMC Restricted Controlled (FR)
Material for Briefing on Monetary Policy Alternatives Brian Madigan June 24, 2009
June 2324, 2009 256 of 261Authorized for Public Release
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AprilFOMCStatement
Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserves balance sheet in light of financial and economic developments.
CLASS I FOMC RESTRICTED CONTROLLED (FR) Page 1 of 5June 2324, 2009 257 of 261Authorized for Public Release
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JuneFOMCStatementAlternativeA
1. Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Indicators of consumer and business sentiment have risen, and household expenditures have shown further signs of stabilizing; nonetheless, spending remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses continue to cut back on fixed investment and staffing but are making progress in bringing inventory stocks into better alignment with sales. Although conditions in financial markets have generally improved, the Committee judges that further monetary policy stimulus is warranted to help ensure that the sharp rise in some longer-term interest rates over recent months does not undermine a recovery in overall economic activity.
2. Substantial resource slack is likely to persist here and abroad, and the Committee expects that inflation will remain subdued. Moreover, the Committee still sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
3. In these circumstances, the Federal Reserve is employing a wide array of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate [for an extended period|at least through mid-2010 ]. To provide additional support to mortgage lending and housing markets and to facilitate further improvement in private credit market conditions, the Committee decided to increase the total amount of its large-scale securities purchases. The Committee now anticipates that over the course of this year the Federal Reserve will purchase up to $1.25 trillion of agency mortgage-backed securities, up to $200 billion of agency debt, and up to $750 billion of Treasury securities. The Committee will evaluate the timing, composition, and amounts of any additional purchases of securities in view of market conditions, the evolving economic outlook, and the necessity of ensuring that policy accommodation can ultimately be withdrawn smoothly and at the appropriate time. The Federal Reserve will also be monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted in light of financial and economic developments.
CLASS I FOMC RESTRICTED CONTROLLED (FR) Page 2 of 5June 2324, 2009 258 of 261Authorized for Public Release
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JuneFOMCStatementAlternativeB
1. Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months, and indicators of consumer and business sentiment have risen. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
2. The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.
3. In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted. [Of course, the Committee will continue to take careful account of the necessity of ensuring that policy accommodation can ultimately be withdrawn smoothly and at the appropriate time.]
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JuneFOMCStatementAlternativeC
1. Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have improved in recent months, and indicators of consumer and business sentiment have risen. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses have continued to cut back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. The Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual recovery in economic activity that is expected to begin later this year.
2. Although the prices of energy and other commodities have risen of late, core inflation has remained moderate, and the Committee expects that overall inflation will remain subdued.
3. In these circumstances, the Federal Reserve is employing a wide array of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate until late this year. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee anticipates that the pace of purchases of such securities will taper off gradually by the end of this year. The Committee will continue to evaluate the timing, composition, and overall amounts of its securities purchases and to carefully monitor the Federal Reserves balance sheet. The Federal Reserve will make adjustments to its credit and liquidity programs as warranted in light of the evolving economic outlook and conditions in financial markets.
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Table 1: Overview of Alternative Language for the June 23-24, 2009 FOMC Announcement
April FOMC
Alternative
A B C
1. Economic Activity
Outlook likely to
remain weak for a time
----- likely to
remain weak for a time
recovery expected to begin
later this year
Pace of Recovery gradual ----- gradual gradual
Risk Assessment -----
Recovery could be undermined
by higher long rates, absent further monetary
stimulus
----- -----
2. Inflation
Outlook will remain subdued will remain
subdued will remain
subdued for a time will remain
subdued
Rationale increasing slack here
and abroad
substantial slack likely to persist here and abroad
recent rise in energy prices;
substantial slack likely to dampen cost pressures
recent rise in energy prices
Risk Assessment
some downside
risk
still some downside risk ----- -----
Overview all available tools a wide array
of tools all available
tools a wide array
of tools
3. Policy Decision
Forward Guidance on Funds Rate
anticipates...for an
extended period
anticipates... for an extended
period or at least through
mid-2010
continues to anticipate...
for an extended period
anticipates...until late this year
Changes in LSAPs -----
$750 billion in Treasuries
by end of year -----
will taper off gradually by end of year
Evaluation of LSAPs
timing andoverall
amounts
timing, composition,
and amounts, subject to exit
strategy
timing and overall
amounts
timing, composition, and overall amounts
Adjustments to Programs ----- as warranted
as warranted [carefully reflecting
the exit strategy] as warranted
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