A simple specification of a strategy for varying the federal funds rate in response to changing economic conditions is provided by the Taylor Rule, a rule developed by John Taylor, a professor at Stanford University.
But investors around the world changed their attitude to risk in 2007 and 2008. The compensation they require for taking on risk has increased. Wholesale funding and securitisation are now more expensive. In the case of securitisation, costs have also risen in part because some investors have left the market altogether. The increase in costs has affected all financial institutions, but to varying degrees.