harmed access to credit by small businesses, and if the disruptions continue to be resolved in an orderly manner, will be unlikely to do so in the future. for example, the current turmoil has centered on securities backed by nonconforming residential real estate loans and loans or other debts of relatively large firms ; so - called collateralized loan obligations ( clos ) and collateralized debt obligations ( cdos ). because, as i discussed earlier, the securitization of small business loans is still quite modest, we would not expect turmoil in the markets for securitized assets to have a large direct effect on small business lending. in addition, it is the relatively large banks that are deeply involved in the loan securitization markets and that have sometimes chosen to conduct a significant portion of their business through so - called conduits, many of which have contracted rapidly in recent months. in contrast, it is the smaller banks that specialize in " relationship finance " to small businesses. nbsp ; these banks are relatively unaffected by disruptions to the securitization markets. thus, once again, we would expect that the direct effect of current events on small businesses would be limited. indeed, the data we have on business lending at small banks show that such loans have continued to expand at a fairly robust pace through mid - october. such data and our conversations with bankers suggest that, at least to date, the supply of credit to small businesses remains healthy. although these arguments and evidence are encouraging, recent events have nonetheless almost surely had some negative effects on small business access to credit, and we cannot rule out further effects. we know that risk premiums embedded in interest rates have increased across a wide range of debt instruments, that credit standards have tightened for most types of lending, and that investors are continuing to reassess both the risks of and the prices they are willing to pay for assets they are considering adding to their portfolios. because loan terms, both risk premiums and credit standards, had previously been unusually low, in many ways these are welcome and healthy developments that, over the longer term, will produce a more efficient and stable financial system. but for many borrowers, including some small businesses, these developments also mean that credit now is, and will probably continue to be, less available and more expensive than it was a few months ago. recent surveys have found evidence that the market for small business credit has tightened. for example, the federal reserve's

the coming months. conclusion in conclusion, the health of the u. s. economy depends importantly on the vitality of the small business sector, and continued access to credit on competitive terms is central to that vitality. our 2007 report to you indicates that, since our 2002 report, small business access to credit has been robust. credit conditions have no doubt tightened since mid - august, but small businesses seem generally to have been able to retain access to credit. however, the effects of recent events are complex, the data are spotty and mixed, and it is far too early to draw the two components sum to more than 45 percent because some loans are collateralized by both business and personal real estate. any firm conclusions. moreover, the current level of uncertainty about the future is unusually high. thus, the federal reserve will continue to monitor closely the effects of current financial market conditions on small business finances as part of its efforts to ensure that distress in financial markets does not spill over into the broader economy. more generally, i assure you that the continued good health of the small business sector is an important consideration for the federal reserve as we strive to fulfill the dual mandate given us by the congress to promote both price stability and sustainable economic growth.