"I think if you go beyond a year - if this continues into the system in the out years, I think there is a risk and that - that we could have a negative reaction in the bond market and that will offset the good that was attempted to be done"

Franklin Raines is addressing concerns about the prolonged implementation of a certain policy or intervention, particularly as it relates to financial or fiscal stimulus measures within a broader economic framework. His remarks highlight the potential perils of extending such actions beyond their intended temporary duration, prolonging them past a year and into the future, often referred to as the "out years". He implies that while these measures might be designed to deliver a positive effect initially, their extended continuation could produce adverse, unintended consequences.

The heart of his warning is centered on the reaction of the bond market. The bond market, where governments and corporations borrow money from investors, is highly sensitive to changes in fiscal policy, government debt, and inflation expectations. If investors perceive that the government is engaging in excessive, ongoing fiscal intervention without a clear end point, they may fear a deterioration of the nation's financial position. This might be due to potential increases in government deficits, the risk of higher inflation, or uncertainty about the government's ability to eventually rein in spending or unwind the policy.

Raines points out the risk that bond investors, sensing fiscal irresponsibility or loss of discipline, could demand higher yields as compensation for increased risks. This would manifest as higher interest rates, rising borrowing costs for both the government and for private entities, and potentially downward pressure on bond prices. Such a reaction could undo or "offset" the intended economic benefits that the original policy sought to achieve. For example, if the policy was meant to stimulate growth or stability through affordable credit or government spending, higher interest rates could stifle lending, cool economic growth, or inflate government debt service costs.

Ultimately, Raines' message is a caution about the dangers of losing sight of fiscal discipline and market confidence, emphasizing that well-intentioned efforts can be undermined if investors lose trust in the government's ability to manage long-term economic stability.