randall s kroszner : global economic and financial challenges – implications for latin america speech by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the annual meeting of the board of governors of the inter - american development bank, miami, florida, 4 april 2008. the original speech, which contains various links to the documents mentioned, can be found on the us federal reserve system ’ s website. * * * strains in global financial markets first became manifest last summer, when sharply rising delinquency rates on subprime mortgages in the united states caused investors to become concerned about the credit quality of home mortgages more broadly and about the exposures of major financial institutions to credit losses. these strains have persisted and, indeed, spread during the winter. in the united states, the continued poor functioning of securitization markets, particularly those for private mortgage - backed securities and other structured finance products, as well as pressures on balance sheet capacity at some large banks and a deterioration in loan performance, have led to tighter credit conditions for many households and businesses. the tightening of credit, along with information suggesting that the housing correction was likely to be deeper and more prolonged than initially thought and that the labor market was weakening, led many analysts to revise down their outlook for economic activity. in turn, the deterioration in the economic outlook seems to have fed back into financial markets, contributing to lower prices for a range of securities and to trading conditions that are more volatile and less liquid. aspects of the u. s. experience have also been felt in other advanced economies, although generally to a lesser degree. the origination of mortgages to borrowers with less - than - prime credit profiles fell sharply over the second half of last year in the united states, and this segment of the market has continued to function poorly. in addition, the origination of jumbo mortgages to prime - rated homeowners has fallen since last summer, as lenders tightened their underwriting standards and raised the cost of those loans. in contrast, mortgages that qualify for backing by the housing government - sponsored enterprises continue to be readily available to households. for other types of consumer credit, such as auto loans and credit cards, access has diminished somewhat in recent months as lending standards have been tightened and securitization of consumer loans has become more difficult. in corporate markets, highly rated firms have continued to issue a sizable volume of bonds, but iss

rates in a more continuous fashion as an extension of our conventional policy space and in a way that reinforces forward guidance on the policy rate. 18 in particular, there may be advantages to an approach that caps interest rates on for details on purchases of securities by the federal reserve, see https : / / www. federalreserve. gov / monetarypolicy / timeline - balance - sheet - policies. htm. for a discussion of forward guidance, see https : / / www. federalreserve. gov / faqs / what - is - forward - guidance - how - is - it - used - inthe - federal - reserve - monetary - policy. htm. see, for example, simon gilchrist and egon zakrajsek ( 2013 ), “ the impact of the federal reserve ’ s large - scale asset purchase programs on corporate credit risk, ” journal of money, credit and banking, vol. 45, ( s2, december ), pp. 29 – 57 ; simon gilchrist, david lopezsalido, and egon zakrajsek ( 2015 ), “ monetary policy and real borrowing costs at the zero lower bound, ” american economic journal : macroeconomics, vol. 7 ( january ), pp. 77 – 109 ; jing cynthia wu and fan dora xia ( 2016 ), “ measuring the macroeconomic impact of monetary policy at the zero lower bound, ” journal of money, credit and banking, vol. 48 ( march – april ), pp. 253 – 91 ; and stefania d ’ amico and iryna kaminska ( 2019 ), “ credit easing versus quantitative easing : evidence from corporate and government bond purchase programs, ” bank of england staff working paper series 825 ( london : bank of england, september ), https : / / www. bankofengland. co. uk / working - paper / 2019 / credit - easing - versusquantitative - easing - evidence - from - corporate - and - government - bond - purchase. see board of governors of the federal reserve system ( 2010 ), “ strategies for targeting interest rates out the yield curve, ” memorandum to the federal open market committee, october 13, available at https : / / www. federalreserve. gov / monetarypolicy / fomc - memos. htm # m2010 ; and ben bernanke ( 2016 ), - 11 treasury securities at the short - to - medium