Though I questioned the efficacy of the expansion of our balance sheet through the purchase of Treasury securities known as “QE2,” I have come to expect that the Federal Open Market Committee would continue to anchor the base lending rate at current levels and also maintain our abnormally large balance sheet, now with footings of almost $ trillion, for “an extended period.” I do not believe it wise to commit to more than that, or to signal further accommodation, when the cheap and abundant liquidity we have made available is presently lying fallow, and when the velocity of money remains so subdued as to be practically comatose. At the FOMC meeting, the committee announced that it “currently anticipates that economic conditions … are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.” In monetary parlance, that is language designed to signal that we are on hold until then. I voted against that commitment-cum-signal. In the press’ reporting of my dissenting vote and those of the other two members of the FOMC who voted against that commitment – Mr. Kocherlakota, my counterpart from the Minneapolis Fed, and Mr. Plosser, my counterpart from Philadelphia – there was substantial speculation as to the reasons for our dissent. I will let my other two colleagues speak for themselves; I can only speak for myself. Let me make clear why I was opposed to freezing the fed funds rate for two years.
I think that makes sense for banks, but we’ve come to the view that it is really not relevant for credit unions in the UK. We also want to avoid discouraging growing firms, and are confident of our ability to manage the failure of smaller credit unions smoothly with our colleagues at the FSCS. Therefore we are launching a  9  For more background on this work, see https://www.bankofengland.co.uk/working-paper/2017/the-determinants-of-uk-credit-unionfailure 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  consultation today in which we propose to change capital requirements to simplify them, remove barriers to growth and deliver a greater degree of financial resilience for smaller credit unions that are more likely to fail. We propose to:  ∙  get rid of our “slab” system and replace it with a graduated, income-tax-style approach where larger credit unions would be required to hold 5% capital for assets up to £ 8% for assets between £ and £ and 10% for assets above £ as opposed to today’s system where firms have suddenly to hold 10% on their entire asset base if they grow a single pound over £ in assets;  ∙  maintain capital requirements at 3% for credit unions with total assets less than £ but introduce a “monitoring zone” of 3-5% whereby if a smaller credit union’s capital falls below 5% we would step up our supervisory activity.