, we will continue to study the business cycle dating committee of the national bureau of economic research has not estimated when the recession officially ended. for comparison, the average pattern of inflation - adjusted credit following business - cycle troughs is that consumer credit and commercial mortgage volumes increase from their levels at the trough, and home mortgage volumes and nonfinancial credit take about ½ year and 1 ¼ year, respectively, to return to their levels at the trough. ( note that the business - cycle expansions that we consider here are those that followed the 1970, 1975, 1982, and 2001 troughs. the expansion following the 1980 business - cycle trough is excluded from these average calculations because the 1981 – 82 recession followed quite quickly after the end of the recession. ) and assess the impact of the various factors at work in determining the total level of credit outstanding. 8 conclusion credit plays a critical role in our economy. that is why policymakers invested so much money and energy into ensuring the survival of our financial system. there really is no single step that can be taken to quickly unclog all lending markets. just as the causes for the decline in lending are multifaceted and complex and took time to evolve, the solutions will likely be equally difficult and will take time to fully work. the financial condition of the banking system, the evolving regulatory climate, the financial condition of businesses and consumers, and the path of the economy will all influence supply and demand for credit. we at the federal reserve, meanwhile, will continue to do everything we can to encourage a return to a healthy credit environment. banks are an important source of credit, providing a way for people to save as well as providing loans to fund everything from college tuition, to business start - ups, to maintaining inventories. thus, as bankers, you serve a vital role in your communities. the fate of banks is deeply intertwined with that of the cities and regions they serve. returning to a normal lending environment – whatever that might be in the months and years ahead – will require constant collaboration and communication among policymakers, bankers, regulators, investors, consumers, and businesses. but it will be worth the effort. i hope i gave you some ideas that will spur some fruitful conversations during your meeting today. i look forward to hearing your questions and your comments. a previous version of this analysis was published as part of the second quarter, 2009 cpp report. see r. edge and d. hancock ( 2009 ), “ u. s

discount window is part of a depository institution ’ s contingency funding plans, the depository institution should establish and maintain operational readiness to use the discount window, which includes conducting periodic transactions. ” - 12 and it is not clear that required pre - positioning or even testing requirements will address the perceived stigma associated with a bank ’ s need to access the discount window for emergency liquidity purposes. the market will continue to take signal from a bank ’ s external activities in liquidity markets — and try to extrapolate whether a bank is using the discount window — and draw a negative inference from this borrowing. broad - based approach to bank liquidity the discount window is a small but important element of bank liquidity, but banks manage liquidity in many ways for day - to - day business needs and during times of market stress. considering discount window reform narrowly ignores the interrelationships among various liquidity resources, liquidity requirements and regulations, and liquidity planning. building resiliency in the financial system requires policymakers to think about these variables together, ensuring that reforms are rational and contribute to a complementary liquidity framework. the complexity of liquidity issues warrants a broad - based review before we embark on piecemeal changes. that review should endeavor to understand not only the need for reform, but also the tradeoffs of different approaches, including the economic cost. however, the proposed change raises many questions about not only cost and effectiveness, but also unintended consequences. another example is the use of federal home loan bank ( fhlb ) advances by some banks as a supplemental source of liquidity, and how this resource functions along the continuum of day - to - day liquidity management to instances of widespread stress in the banking system and among individual firms. the fhlbs are an important source of liquidity for many banks. at the same time, the operational design of fhlb advances make these advances poorly suited to function as emergency liquidity support for the banking system. by contrast, the fed ’ s discount - 13 window lending authority, and the flexible authority to lend under section 13 ( 3 ) of the federal reserve act, place the fed well to function as the lender of last resort in support of banking system liquidity during times of stress. a note on the design of emergency lending facilities : the bank term funding program before closing, i would like to briefly reflect on events we saw this winter, when design flaws with the bank term funding program ( bt