Indeed, during the turbulences, market liquidity first declined for a number of assets closely related to the market for sub-prime mortgage backed securities – the core of the recent turbulence. It then went on to affect all kinds of structured finance products, including re-pricing of plain-vanilla ABS and RMBS securities. Problems in the ABS market spilled over to the market for asset-backed commercial papers.
But today I'll focus on the changes that have taken place in the conduct of monetary policy. By the late 1950s, the Bank's monetary policy and the federal government's fiscal policy were trying to find a balance between controlling inflationary pressures in the economy and encouraging high levels of employment.