This Economic Letter is adapted from a speech delivered by Janet L. Yellen, president and CEO of the Federal Reserve Bank of San Francisco, on October 30, 2008, to the UC Berkeley-UCLA Symposium "The Mortgage Meltdown, the Economy, and Public Policy," at the University of California, Berkeley.

The Federal Reserve has responded to a severe recession by developing programs to bolster the financial system and restore economic growth. The Fed has the tools to unwind these programs when appropriate, maintaining price stability. The following is adapted from a speech delivered by the...