7 Funding conditions, in turn, will be reflected in the cost and availability of credit to final borrowers. The recent sharp tightening of lending standards to a broad range of U.S. mortgage borrowers is a serious reminder of this possibility.
•  Second, and more fundamentally, the recent financial turmoil indicates that we need a better understanding of the “originate and distribute” model of financial intermediation and its implications for monetary policy transmission. This model allows greater risk diversification and helps ease credit constraints in normal times.