*  *  *  Well-functioning financial markets are an essential link in the transmission of monetary policy to the economy and a critical foundation for economic growth and stability. However, since August, severe financial strains have shaken this foundation. A sharp housing contraction has generated substantial losses on many mortgage-related assets and a broad-based tightening in credit availability.
Consistent with its role as the nation's central bank, the Federal Reserve has responded not only with an easing of monetary policy but also with a number of steps aimed at reducing funding pressures for depository institutions and primary securities dealers and at improving overall market liquidity and market functioning.