The economy is rebounding and poised to see growth in the second half of the year, William Dudley, president of the New York Federal Reserve told CNBC.
Dudley also offered his thoughts on inflation, Treasury auctions and what the Fed has learned from the economic crisis.
Inflation Fears Overblown
"My view is that we have tools to manage our balance sheet so that we'll not have an inflation outcome ... We're far along in terms of having the interest on excess reserves, and just in case, developing other means of pulling out the excess reserves."
Improvement in the Second Half
"The economy is turning around, there's no question about that ... I think it's highly likely that we're going to see decent growth in the second half of this year. The bigger question is what happens in 2010."
A Learning Process
"I think we are learning from the experience ... A lot of mistakes were made by lots of different parties. Now, could we have done better? Absolutely. You know, I think on the supervision side, you know, I think it's fair to say we could have been tougher. We probably could have been smarter."
Conserving Capital
"One thing that upset me during the crisis, frankly, is the fact that banks continued to pay out dividends, continued to buy back shares to show that they were strong, when in fact they were actually dissipating their capital that we actually needed so that banks could continue to make loans. So I think we need to think a little harder about a regulatory regime where, you know, if the bank's stock price plummets and the banks' aren't doing very well then the dividends get shut off automatically."