"Should it turn out that – for reasons that we don't expect, but that we certainly are concerned may happen, – the pressures on the short-term markets drive the federal-funds rate down close to zero, that does not mean that the Fed is out of business on the issue of further easing," Greenspan warned on May 21st that year."Even though short-term rates are at 1.25%, longer-term rates are significantly above that. We do have the capability – should that be necessary – of moving out on the yield curve, essentially moving long-term rates down."
"The Fed stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance, and has substantial room to keep lowering overnight rates. However, Fed members have concluded it is most unlikely the Fed would need to take unconventional steps such as buying Treasuries to lower market rates."
"Leeping interest rates too low for so long could cause problems. Some members are concerned that keeping monetary policy stimulative for so long might be encouraging increased leverage (ie; borrowing), and excessive risk-taking, (ie; bidding up stock prices). Such developments could heighten the potential for the emergence of financial and economic instability (ie; bubbles) when policy tightening is necessary in the future."