called “ the blob ” that i saw years ago in an old movie. like the blob, panic attacked one institution after another, and with each institution it ate, it grew bigger and stronger. we had just watched it eat lehman. we could not stop it there because we are only authorized to lend against collateral, and lehman did not have enough collateral. now it was focused on aig. unlike the situation with lehman brothers, we were presented with an action we could take, a loan we could make to avoid the collapse of aig. our knowledge of the company was limited because we had never supervised aig, but the loan could be secured with collateral. based on our assessments of the collateral, we believed the risk of the loans to be limited. and while the risk of making the loan was limited, the risk of not making the loan – of letting aig, which was significantly larger than lehman, fail – was certain to be huge. and no other entity – not a private company, not a consortium of private companies acting together, not any other branch or agency of the government – was in a position to do anything. the clock was ticking, and default was imminent. there was no time to gather more information or find another solution. so i ask you, what would you have done? it was in this context that the federal reserve, with the full support of the treasury, made a loan to aig to prevent its failure. the loan imposed tough terms, senior management was replaced, and shareholders lost almost all of their investments. if i had to cast that vote again, even knowing all that followed, including the criticism that we have received, i wouldn ’ t change it. i still believe that the consequences would have been far worse for all businesses and consumers if we had let aig fail. despite the claims by some that healthier wall street firms or even the small businesses and consumers on main street did not benefit from assistance to aig, i would argue that no business or individual was immune to the effects of a sequential collapse of key financial intermediaries. as it was, we still had frozen credit markets so we turned our attention to facilities designed to unfreeze those markets. while actions like our lending to aig have grabbed the biggest headlines, other moves by the federal reserve, like those to ensure the functioning of consumer credit markets, were equally important when it came to supporting consumers and the economy in the midst of the financial crisis.

2009, pp. 5498 – 5584 ; regulation dd, truth in savings act ( 12 cfr part 230 ), vol. 74, no. 18, january 29, 2009, pp. 5584 – 94 ; regulation e, electronic funds transfers ( 12 cfr part 205 ), vol. 74, no. 18, january 29, 2009, pp. 5212 – 43 ; regulation z, truth in lending act ( 12 cfr part 226 ), vol. 74, no. 18, january 29, 2009, pp. 5244 – 5948. see also board of governors of the federal reserve system ( 2008 ), “ review of testing of overdraft notices ( 10. 26 mb pdf ) ” ( december 8 ). to be front loaded and clearly disclosed. i fully expect current banking products to change as banks adjust to accommodate the new requirements. and i understand the potential for at least a temporary lull in service innovation as providers concentrate on change implementation. at the same time, i have every confidence that competition will ultimately restore innovation, but with products that are safer, simpler, and more transparent to consumers. consumer lending : post - crisis not only have the regulations that govern consumer products changed, the consumer to whom those products are sold is considerably different than the consumer of a few years ago. during the crisis, household net worth declined about 25 percent from peak to trough. 7 while some net worth was restored as stock markets recovered, recent retrenchment in markets demonstrates the volatility that still remains. roughly 20 percent of mortgage borrowers are underwater in their mortgages, leaving them without home equity to tap through sale or borrowing and limiting their ability to move to reduce expenses or find employment. still 9. 7 percent of the workforce is unemployed and nearly 6 percent is working only part time while still seeking full - time employment. although low mortgage rates help keep mortgage payments relatively low from an historical perspective, households remain quite burdened by debt payments. the household debt service ratio, which represents the share of household after - tax income obligated to debt repayment, peaked near 14 percent in 2007 before dropping off to about 12½ percent recently. despite its recent decline, this ratio is still above its average over the past 30 years. much of this recent drop reflects the largest annual decline in aggregate consumer credit outstanding in the nearly 70 - year history of the series. for the moment, the contraction in consumer credit appears to be a story