Fed Speak

• New York Fed president Tim Geithner discusses concerns about systemic risk exposure in financial markets due to recent financial innovation and suggests steps to reduce the risk exposure. He says, "The frontier of challenges in the risk management process lies principally in the discipline of stress testing and scenario analysis to capture potential losses in adverse conditions in the "tail" of the distribution. This has been and will continue to be a principal focus of our supervisory efforts."
• Chicago Fed president Michael Moskow talks the structure of state and local pensions and the magnitude of the growing funding gap which threatens to undermine the ability to fund public programs in other areas.
• As noted here after the January 31 FOMC meeting, only eleven of the twelve regional banks asked for an increase in the discount rate with the Minneapolis Fed the one exception. Since the discount rate is currently set at 1% above the federal funds rate, a bank's proposed change in the discount rate can be interpreted as its proposed change in the federal funds rate. Today, the minutes of Board discount rate meeting were released, and, as Blooomberg notes, they indicate that "the Minneapolis Fed, voted on Jan. 19 to keep the discount rate unchanged at 5.25 percent because it did not see a "compelling" case for an increase, the minutes said, "although they noted that it was a close call.""