|Atlanta Fed President Discusses Recent Events in Housing, Capital Markets
Problems in housing and mortgage finance have spread from subprime borrowers to capital markets, Dennis P. Lockhart, president and chief executive officer of the Federal Reserve Bank of Atlanta, noted in a September speech. As subprime mortgages have become hard to value, the secondary market for these securities has shrunk dramatically, making it even more difficult to value the securities by market price. In the speech, Lockhart discussed recent developments in mortgage and financial markets as well as principles he uses to guide his approach to policymaking.
A period of "intense adjustment"
Lockhart identified his three current guiding principles. "The first principle is let markets work," he said. "The second principle is the central bank has a responsibility to promote orderly conditions in financial markets, stepping in only as necessary to avoid severe system disruption. The third principle is to make sure the second principle doesn't undermine our long-term mission."
Applying principles for long-term benefit
September 21, 2007