For instance, holders of uninsured debt (such as large certificates of deposits or corporate debt issues) care mostly about the risk of bankruptcy. They don’t benefit if the bank’s stock price rises when undue risk-taking pays off. Consequently, they focus on what bank managers are doing to avoid default.
As noted in the September FOMC minutes, in the months ahead, we will have the opportunity to deliberate and to clarify how the asset purchase program could best work in combination with forward guidance to support achievement of maximum employment and 2 percent average inflation.