the period just before the financial crisis, the system ’ s portfolio of domestic securities has increased from about $ 800 billion to $ 2 trillion and has shifted from consisting of 100 percent treasury securities to having almost two - thirds of its investments in agencyrelated securities. in addition, the average maturity of the treasury portfolio nearly doubled, from three and one - half years to almost seven years. the fomc plans to return the system ’ s portfolio to a more normal size and composition over the longer term, and the committee has been discussing alternative approaches to accomplish that objective. one approach is for the committee to adjust its reinvestment policy – that is, its policy for handling repayments of principal on the securities – to gradually normalize the portfolio over time. currently, repayments of principal from agency debt and mbs are not being reinvested, allowing the holdings of those securities to run off as the repayments are received. by contrast, the proceeds from maturing treasury securities are being reinvested in new issues of treasury securities with similar maturities. at some point, the committee may want to shift its reinvestment of the proceeds from maturing treasury securities to shorter - term issues, so as to gradually reduce the average maturity of our treasury holdings toward pre - crisis levels, while leaving the aggregate value of those holdings unchanged. at this juncture, however, no decision to change reinvestment policy has been made. a second way to normalize the size and composition of the federal reserve ’ s securities portfolio would be to sell some holdings of agency debt and mbs. selling agency securities, rather than simply letting them run off, would shrink the portfolio and return it to a composition of all treasury securities more quickly. fomc participants broadly agree that sales of agency - related securities should eventually be used as part of the strategy to see federal reserve board of governors ( 2010 ), “ fomc statement, ” press release, june 23. normalize the portfolio. such sales will be implemented in accordance with a framework communicated well in advance and will be conducted at a gradual pace. because changes in the size and composition of the portfolio could affect financial conditions, however, any decisions regarding the commencement or pace of asset sales will be made in light of the committee ’ s evaluation of the outlook for employment and inflation. as i noted earlier, the fomc continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended

. at the time of corrigan's essay - - the early 1980s - - the statutory authority for that separation was largely contained in two laws : the glasssteagall act, which separated commercial banking from certain investment and securities activities, and the bank holding company act ( with amendments ), which narrowly limited the activities of corporations that were allowed to own banks. when it passed in 1956, the bank holding company act was thought to have been in response to one company's aggressive expansion into banking activities. that company, transamerica insurance, had expanded into several western states and concerns were raised about the resulting concentration of financial resources. therefore, the ensuing body of law on the commerce and banking issue concentrated significantly on separating, or was inspired by desire to separate, banking from securities or banking from insurance. from the time of corrigan's essay until passage of gramm - leach - bliley, the banking industry had expanded substantially into both the securities and insurance agency fields, though significant restrictions still remained. much of the industry's expanded securities authority was gained through the federal reserve's approval of securities underwriting for banks, under section 20 of the glass - steagall act. under the federal reserve's rule, a bank subsidiary was " not engaged principally " in securities underwriting if at first 5 percent, then 10 percent, and ultimately 25 percent of its revenue came from underwriting. this expanded authority allowed many banking organizations, though almost exclusively large banks, to significantly expand their domestic securities activities. these same powers were extended to foreign banks operating in the united states. in insurance, gains for the banking industry were largely the result of court determinations that annuities could be underwritten and sold by banks. court determinations also expanded national banks'ability to market insurance products. consequently, banks of all sizes have expanded their involvement in insurance and annuity activities. by 1999, banks and bank holding companies had gained significant additional product authority in securities and insurance, areas that had been perceived to be on the other side of the banking and commerce wall at the time corrigan wrote his essay. a number of factors persuaded congress that federal action was appropriate, and the gramm - leach - bliley act was passed. congress had learned from the securities and insurance experiences of foreign banks, both the high points and the low points. on the one hand, institutions in some european countries had successfully broadened their securities and insurance activities. on the other hand, there were