MNI TRANSCRIPT: Powell on Repo Oversight

     WASHINGTON (MNI) - The following is the portion of a transcript from

Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting

Wednesday:

     Q: I want to ask more about the repo issues and what you are doing beyond

open market operations. Are you currently, for example, telling examiners not to

prefer reserves over treasuries for supervisory purposes? Are you talking to the

treasury department about reducing the level of volatility in their account at

the fed? On the standing repo facility, is it that you would be inclined to do

it but you need to figure out the details? Or what would drive the decision on

whether or not to do that?

     A: So on treasuries versus reserves, we have done a ton of work on that. We

have talked to supervisors, if you look at the banks they are all over the place

on the composition of their buffer. You have a business model and that business

model suggests what your stress out flows will be, and that suggests what your

buffers should be. You see them making quite different choices. Some of them

have lots of reserves and fewer treasuries, then they training their mind and

switch. It is not obvious there is one thing happening. We have tried to

understand that talking to supervisors notwithstanding that. In terms of the

TGA, we have not tried to pull the TGA into this yet. We have taken it as

exogenous, I don't know that at some point we won't have those discussions, but

we want treasury to be able to have the cash that it needs, and we are taking

that as exogenous to our work. There may come a time where we talk about that.

But we haven't done much of that. Standing repo facility, your question on that

is what are we thinking about it? I think we are more focused, frankly, on the

bill purchases, the year end, and also the review of supervisory and regulatory

issues that we are digging into. And because we think, these are structural

things, right, where you could without sacrificing safety and soundness, allow

the liquidity that is already there to flow more freely, perhaps by making

fairly straightforward noncontroversial changes. We think there is some of that.

We are working hard and fast. But those are things, if they take rule changes,

it will take a notice of public rule making, it will take three months and

things like that, those things take time. These things that we are working on

now though, like going through year end with the overnight facilities and the

bill purchases, and the term repo, those are things that we have to do right now

and are doing.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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