00:00There's been a lot of discussion of late about reducing the size of the balance sheet of the
00:05Federal Reserve to reduce our footprint in the financial system. I think it's important to frame
00:11the discussion first by being clear about the nature of the problem to be solved and then
00:17weighing the trade-offs of any remedies. I think shrinking the balance sheet is the wrong objective
00:24and many of the proposals to meet this objective would undermine bank resilience, impede money
00:31market functioning, and ultimately threaten financial stability. Some would actually increase
00:37the Fed's footprint in financial markets. That's because the Fed's footprint in the financial system,
00:44properly understood, consists not only of the duration, composition, and size of our balance
00:50sheet, which are each distinct issues, but also our roles in promoting the safety and soundness
00:57of banks, running the backbone of the payment system, and supporting financial stability.
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