Federal Reserve Bank of New York President William Dudley said Thursday that he is proud of the Federal Reserve’s efforts to rescue banks during the financial crisis, while acknowledging that they were unfair to the millions of homeowners and taxpayers who lost out at the same time.
“Let me be clear: The interventions by the Federal Reserve during the crisis were designed to safeguard the economy, for the benefit of all Americans, while protecting the taxpayer,” Dudley said in a speech at the Virginia Military Institute in Lexington, according to prepared text. “I am proud of our record on both accounts.”
Dudley, who took the helm at the New York Fed shortly after the worst of the crisis in early 2009, said he believed that the world would have suffered a “depression” without the Fed’s unprecedented efforts to rescue specific banks and financial firms and even prop up whole markets.
While Tim Geithner, who would go on to be President Obama’s first Treasury secretary, led the New York Fed at the time, Dudley was an executive vice president at the bank during the lead-up to the crisis. He acknowledged that the Fed made mistakes in regulation that contributed to the crisis and that there was legitimate anger about the bailouts, anger still alive in the U.S. electorate today.
“I agree with those critics who argue that there was something fundamentally unfair about the disparity in treatment between the few large financial institutions that were saved versus the millions of individuals who lost their homes or their jobs,” Dudley said. “My response is not particularly satisfying.”
Dudley argued that the Fed has made strides in improving its supervision of banks and in communicating its monetary policy decisions. He also defended the New York Fed’s unique role in the system, because it is in the financial center of the country.
On each of those topics, Dudley, an alumni of Goldman Sachs, has been criticized and scrutinized by lawmakers. Some Democrats, in particular, have sought to diminish the New York Fed’s influence within the central bank system and to limit Wall Street’s influence on the New York Fed.
In one memorable instance in late 2014, Dudley was grilled by liberal critics of the Fed’s supervision of Wall Street, including Sens. Elizabeth Warren, D-Mass., and Sherrod Brown, D-Ohio, during a committee hearing. Then, Dudley drew some criticism for suggesting that his regional Fed bank operates as a fire warden, not a cop, with respect to the banks.
