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CHAIRMAN BERNANKE. Bill, if we were going to take action today, what would you recommend in terms of counterparties? Should we say an unlimited amount? Should we specify an amount? Can we leave the time open? What are your recommendations on all those dimensions?

MR. DUDLEY. Certainly you want to make it pretty broad. You want to make it to the Bank of England, Switzerland, the ECB, the Bank of Japan, potentially Canada. I would leave it to their discretion if they would like to participate. I would make the offer to them; and if they want to participate, then we should be willing to do that. In terms of size, I think it is really important that you don’t create notions of capacity limits because the market then can always try to test those. Either the numbers have to be very, very large, or it should be open ended. I would suggest that open ended is better because then you really do provide a backstop for the entire market. As we’ve seen with the PDCF, if you provide a suitably broad backstop, oftentimes you don’t even actually need to use it to any great degree. So I think that should be the strategy here.

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CHAIRMAN BERNANKE. Thank you. Are there questions for Dave and Nathan?

MR. FISHER. Could I ask just one question, Mr. Chairman?

CHAIRMAN BERNANKE. President Fisher.

MR. FISHER. Could you interpret for us the Bank of China’s cut in the bank lending rate?

MR. SHEETS. Yes. Yesterday the PBOC cut its main policy rate 27 basis points. I guess they felt that 26 would not have been enough and 28 would have been too much. [Laughter] And 27 was just the right number. I’d say a couple of thoughts were there. One important point is that inflation in China has decelerated significantly. In the spring they were looking at twelve-month inflation rates of around 8.3 percent. The latest reading for August was 4.9 percent. So it’s clearly on a decelerating trajectory. That has been driven by a marked decline in food prices. Earlier this year, food prices were moving up at over a 20 percent rate, and now it is about 10 percent. So the deceleration in prices; some concerns about where activity is going, particularly in the aftermath of the Olympics; and signs of slowing external demand have given them the scope they need to cut policy rates. Besides the cut in monetary policy, we’re also hearing reports that the authorities are poised to implement fiscal stimulus if that’s necessary.

MR. FISHER. Thank you.

CHAIRMAN BERNANKE. Three is a lucky number in China. Don was going to tell you that 3 cubed is 27. [Laughter].

MR. KOHN. He was also going to wonder, Mr. Chairman, whether we needed to harness the mystical powers. [Laughter]

CHAIRMAN BERNANKE. I think we have good feng shui here.

MR. SHEETS. The science of monetary policy.

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MS. YELLEN. [...] My contacts report that cutbacks in spending are widespread, especially for discretionary items. For example, East Bay plastic surgeons and dentists note that patients are deferring elective procedures. [Laughter] Reservations are no longer necessary at many high-end restaurants. And the Silicon Valley Country Club, with a $250,000 entrance fee and seven-to-eight-year waiting list, has seen the number of would-be new members shrink to a mere thirteen. [Laughter]