the government ’ s interventions to support fannie mae and freddie mac have made it clear that there is no credit risk in the federal reserve ’ s purchase of such obligations. also, the authors don ’ t acknowledge that the ability to purchase agency mbs has two benefits. first, it enables the federal reserve to purchase longer - duration assets at a faster pace without disrupting market functioning. this facilitates larger lsap programs, when a larger program is viewed as necessary. second, it opens up another channel by which asset purchases can provide stimulus — by narrowing the spread between agency mbs and treasuries, the federal reserve can drive down long - term mortgage rates and provide support to the housing sector and to home prices. when monetary policy is constrained at the zero lower bound for interest rates, being able to purchase agency mbs seems like a good tool to have available. i am also a bit baffled by the conclusion that the fed should “ consider larger and looser caps, possibly specified in terms of quarterly rather than monthly changes, with caps perhaps removed completely by 2019. ” it seems to me that the current process of balance sheet normalization is proceeding very smoothly. we placed caps on redemptions because we wanted to limit the potential for market disruption that might occur if the amount of securities that had to be absorbed by private markets fluctuated unduly. the cost of the caps in terms of delaying the shrinkage of the balance sheet is very low. even if the caps were to be removed completely at the end of 2018, it would most likely pull forward the timing of normalizing the balance sheet size by only two quarters. the delay due to the caps is small because, when they are fully phased in, they are likely to be binding only for treasuries and then only in the middle month of each quarter. while i don ’ t agree with some of the broader conclusions of the paper, i do agree that a healthy skepticism about event studies is warranted. the major theme of the paper is that event studies that have sought to measure the impact of the federal reserve ’ s three major lsap programs are flawed for a number of reasons. these include potential selection bias of the events chosen and the fact that event studies may not capture all the factors that influence how market prices respond to lsap announcements. the first problem with event studies, of course, is the issue of how much new information is revealed by the actual policy announcement. i would argue that lsa

##extricably linked to the path of the virus. a strong economic recovery depends on effective and sustained containment of covid - 19. turning to the question of what the goals for recovery are : one measure of success is a return to the sustained growth and historically low unemployment that we had attained before the pandemic. i know this seems a long way from where we are today and may seem unreachable during these darkest days of the recession. but history teaches us that the economy can get back to full strength, even after deep downturns. policy responses the unique nature of this recession and the uncertainty that comes with it mean that the policy responses — public health, fiscal, and by the fed — need to be designed to reflect the nature of the pandemic and the challenges it poses to the economy. although i will focus on events in the united states, it is important to stress that this is a global health and economic crisis. most other countries are facing similar challenges and are likewise engaged in a range of policy actions. our economic prospects are tied to our ability to contain the spread of the virus, care for those who fall ill, and develop effective treatments. in addition, fiscal policy has played a critically important role in providing financial support to families, small businesses, and those who are out of work during the crisis. this timely support contributed greatly to the rebound in consumer spending and jobs that we have seen over the past two months. the federal reserve has taken rapid and significant actions to stabilize critical parts of our financial system and to support the flow of credit, thereby helping position the economy for a strong and sustained return to maximum employment and price stability. in march, the federal open market committee ( fomc ) brought the target range for the federal funds rate to near zero. 6 the fomc has indicated that it expects to keep interest rates at this level until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. 7 2 / 4 bis central bankers'speeches bringing interest rates down to near zero makes it easier for households and businesses to meet their borrowing needs and fosters favorable financial conditions that will help promote a rebound in spending and investment. in addition, the fed has been conducting large - scale repo operations and purchasing sizable quantities of u. s. treasury securities and agency mortgage - backed securities to support market functioning at a time of extraordinary volatility in markets. 8 these actions averted a