January 16 Fed governor says 'economy still faces challenges' (Richmond Times-Dispatch)

The Federal Reserve Bank's unusual steps to ease credit during the worst of the financial panic of 2008 and 2009 helped prevent a much deeper and wider economic crisis, said Elizabeth A. Duke, a member of the board of governors of the Federal Reserve System.

"Our efforts to provide liquidity were criticized by some as bailouts for the banks," Duke said in a speech Monday night at the University of Richmond.

"I can understand how it could seem that way, but I also know that every action the Fed took was directed at improving the economy rather than the well-being of the banks," said Duke, a former community banker from Virginia who joined the Federal Reserve System's board in August 2008.

Among those controversial "bailouts" was one that Duke described as the most difficult decision she made since joining the Fed's board: lending money to the insurance giant AIG.

"That was not something I had even contemplated would be possible before I got there," she said. "It came to the point where it seemed that the outcome of not lending to AIG was worse than the outcome of lending to AIG."