. as you know, in the latter part of 2008 and early 2009, the federal reserve took extraordinary steps to provide liquidity and support credit market functioning, including the establishment of a number of emergency lending facilities and the creation or extension of currency swap agreements with 14 central banks around the world. 2 in its role as banking regulator, the federal reserve also led stress tests of the largest u. s. bank holding companies, setting the stage for the companies to raise capital. these actions – along with a host of interventions by other policymakers in the united states and throughout the world – helped stabilize global financial markets, which in turn served to check the deterioration in the real economy and the emergence of deflationary pressures. one basis point equals one - hundredth of 1 percentage point. for more on these actions to stabilize markets and their effects, see bernanke ( 2009 ). bis central bankers ’ speeches unfortunately, although it is likely that even worse outcomes had been averted, the damage to the economy was severe. the unemployment rate in the united states rose from about 6 percent in september 2008 to nearly 9 percent by april 2009 – it would peak at 10 percent in october – while inflation declined sharply. as the crisis crested, and with the federal funds rate at its effective lower bound, the fomc turned to nontraditional policy approaches to support the recovery. as the committee embarked on this path, we were guided by some general principles and some insightful academic work but – with the important exception of the japanese case – limited historical experience. as a result, central bankers in the united states, and those in other advanced economies facing similar problems, have been in the process of learning by doing. i will discuss some of what we have learned, beginning with our experience conducting policy using the federal reserve ’ s balance sheet, then turn to our use of communications tools. balance sheet tools in using the federal reserve ’ s balance sheet as a tool for achieving its mandated objectives of maximum employment and price stability, the fomc has focused on the acquisition of longer - term securities – specifically, treasury and agency securities, which are the principal types of securities that the federal reserve is permitted to buy under the federal reserve act. 3 one mechanism through which such purchases are believed to affect the economy is the so - called portfolio balance channel, which is based on the ideas of a number of well - known monetary economists, including james tobin, milton friedman, franco modigliani, karl brunner

all, who hears about the idea that never came to fruition - - but it serves as an important check in the policymaking process. as i mentioned, economic thinking at the cea has been marked by important continuities. nevertheless, the evolution of thinking at the cea over the years has reflected the economic challenges of each era as well as continuing developments in economic research. the ideas of keynesian stabilization that were an important motivation for the employment act reached their zenith during the kennedy administration. since that time, the cea has followed the economics profession away from a belief that fiscal policy can or should fine - tune the level of aggregate demand. during the 1960s and 1970s, the economy was confronted by rising inflation pressures, a series of energy shocks, and a slowdown in the underlying pace of productivity growth. at the same time, there was considerable ferment within the economics profession, as prevailing views of the inflation process and of the government's role in economic stabilization were challenged. successive ceas agonized over these issues and over whether to use the new ideas emerging from the academy and, if so, how. since the 1980s, the cea has focused increasingly on understanding the sources of economic growth and the supply side of the economy. the focus on international issues, too, has intensified as trade and international financial flows between the united states and other countries have grown. i should also note that, despite its overtly macroeconomic origins, the cea has expanded successfully into the realm of microeconomics, particularly issues related to regulatory policy and market structure. notwithstanding these changes in focus over time, there have been important intellectual continuities. in particular, a common theme throughout the cea's history has been a belief in the importance of market forces, and this belief stands as an important legacy of the cea. 2 / 3 of course, as chairman of the council during president ford's administration, i was close to some of these debates and decisions. i was recruited to serve as chairman of the council by president nixon's economic team. as it turned out, i was before the senate banking committee for confirmation the day that president nixon resigned. president ford quickly renominated me, and i began work at the cea in september 1974. i was privileged to serve president ford, and found him to be a very effective leader. parenthetically, there are some interesting parallels between president ford and president truman. both were serving as vice president