The past three years have dramatically underscored the interdependence of the world’s
financial institutions and financial markets. The financial crisis also, by the way,
increased awareness of the interdependence of the actions of monetary and fiscal
authorities around the world. In light of the crisis and the reality of financial
interdependence, the Federal Reserve expanded the types of policy actions it was willing
to take. My view is that our openness to innovative measures was critical to avoiding far
more severe outcomes – by which I mean cascading failures of financial firms and a
locking up of liquidity and credit extension, further impeding households and companies
and eventually leading to unemployment that far exceeds our current, far too high, level.