Federal Reserve Board Gov. Elizabeth Duke warned against using regulation to address the "problem of the moment," which could lead to overly restrictive access to credit.

"For example, if, in reaction to the abuses in consumer and mortgage lending over the past few years, we were to focus solely on consumer protection policies, the result could be overly restrictive access to credit, which could threaten future economic growth," Duke said in prepared remarks to a community development conference Wednesday in Cleveland.

"On the other hand, if the policy focus is strictly on stabilizing the banking sector without giving due consideration to consumer protection, both consumer and investor confidence will remain weak and we will risk repeating the mistakes of the past," she said.

Duke recalled in her days as a banker, loans were kept on the balance sheet.

"While I don't necessarily believe we need to return to a time when all loans are held on balance sheet, I do believe we need a system of balanced incentives for the longer-term prosperity of all," she said.

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