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Jennifer Martin's Blog: Containing the Crisis and Promoting Economic Recovery

Federal Reserve Governor Elizabeth A. Duke spoke on June 15, 2009 at the Women in Housing and Finance Annual Meeting in Washington, D.C. on whether the government's actions so far in the economic crisis have been effective. Although Governor Duke believes that the programs have been "broadly successful in relieving stresses in the key credit markets," the job is not complete. Governor Duke concluded:

In the past, economic downturns were deepened or prolonged by the premature withdrawal of monetary or fiscal stimulus. To the extent that the severity of the current downturn has thus far been mitigated by extraordinary credit support, a significantly weaker path of lending--and thereby economic activity--could very likely occur if policy support for the financial sector is withdrawn too soon. In this case, stigmatization of support tools such as liquidity programs, direct lending programs, or government capital injections that make participants unwilling to use such programs will have the same effect as a direct policy withdrawal of the programs. And while the path of credit in this cycle compared with others is encouraging, the downturn in credit evident in the most recent quarter provides a reminder that conditions are still far from normal.

Full post as published by University of Louisville Law Faculty on June 24, 2009 (boomark / email).