##mit funds for lengthy periods, so they cannot, through withdrawals, force clos to sell assets at distressed prices. addressing the risks : monitoring and acting overall, vulnerabilities to financial stability from business debt and other factors do not appear elevated. we take the risks from business debt seriously but think that the financial system appears strong enough to handle potential losses. we also know that our dynamic financial system does not stand still. we can always learn more about financial markets, and we will always act to address emerging risks. together with our domestic and international counterparts, we are monitoring developments in business debt markets, working to develop and share data on how these markets operate, studying ways to further strengthen the system, and working to ensure that banks are properly managing the business debt risks they have taken on. through the fsoc, the banking and market regulators coordinate our monitoring of financial conditions. in recent meetings, the fsoc has discussed leveraged lending in depth. we recognize that each regulator directly sees only a part of the larger picture, and we are working to stitch these parts together so we can collectively see that larger picture and the risks it holds. for example, the securities and exchange commission is examining the potential for liquidity strains at mutual funds, and the commodity futures trading commission is working to understand the use of derivatives to hedge risks associated with leveraged loans. what else are we watching for? business debt growth has moderated somewhat since early 2018, but this might be just a pause. another sharp increase in debt, unless supported by strong fundamentals, could increase vulnerabilities appreciably. - 10 businesses, investors, and lenders need to focus on these vulnerabilities — as will the federal reserve. in addition, regulators, investors, and market participants around the world would benefit greatly from more information on who is bearing the ultimate risk associated with clos. we know that the u. s. clo market spans the globe, involving foreign banks and asset managers. but right now, we mainly know where the clos are not — only $ 90 billion of the roughly $ 700 billion in total clos are held by the largest u. s. banks. that is certainly good news for domestic banks, but in a downturn institutions anywhere could find themselves under pressure, especially those with inadequate loss - absorbing capacity or runnable short - term financing. the federal reserve is participating in international efforts, under the auspices of the fsb, to improve our

1996. on the other hand, we do not see evidence of widespread imbalances either in business inventories or in stocks of equipment and consumer durables that would lead to a substantial cutback in spending. and financial conditions overall remain supportive ; real interest rates are not high by historical standards and credit is readily available from intermediaries and in the market. the usual uncertainties in the overall outlook are especially focused on the behavior of consumers. consumption should rise roughly in line with the projected moderate expansion of disposable income, but both upside and downside risks are present. according to various surveys, sentiment is decidedly upbeat. consumers have enjoyed healthy gains in their real incomes along with the extraordinary stock - market driven rise in their financial wealth over the last couple of years. indeed, econometric models suggest that the more than $ 4 trillion rise in equity values since late 1994 should have had a larger positive influence on consumer spending than seems to have actually occurred. it is possible, however, that households have been reluctant to spend much of their added wealth because they see a greater need to keep it to support spending in retirement. many households have expressed heightened concern about their financial security in old age, which reportedly has led to increased provision for retirement. the results of a survey conducted annually by the roper organization, which asks individuals about their confidence in the social security system, shows that between 1992 and 1996 the percent of respondents expressing little or no confidence in the system jumped from about 45 percent to more than 60 percent. moreover, consumer debt burdens are near historical highs, while credit card delinquencies and personal bankruptcies have risen sharply over the past year. these circumstances may make both borrowers and lenders a bit more cautious, damping spending. in fact, we may be seeing both wealth and debt effects already at work for different segments of the population, to an approximately offsetting extent. saving out of current income by households in the upper income quintile, who own nearly three - fourths of all non - pension equities held by households, evidently has declined in recent years. at the same time, the use of credit for purchases appears to have leveled off after a sharp runup from 1993 to 1996, perhaps because some households are becoming debt constrained and, as a result, are curtailing their spending. the federal reserve will be weighing these influences as it endeavors to help extend the current period of sustained growth. participants in financial markets seem to believe that in