Jan. 4 (Bloomberg) -- Federal Reserve emergency loan programs exceeding $2 trillion have mitigated the credit crisis and reduced potential damage to the U.S. economy, a senior central bank official said.

The Fed’s lending is “not as elegant as we might like,” William Dudley, the New York Fed’s executive vice president for markets, said today at a conference in San Francisco. Still, “if we don’t do anything to slow down the pace of that adjustment” in banks’ balance sheets, “it’s going to do very significant damage to the macro economy,” he said.

Fed loans have bolstered banks and other financial institutions reeling from the credit crunch and collapse of Lehman Brothers Holdings Inc. Losses and writedowns since the start of last year have exceeded $1 trillion.

Dudley’s comments parallel an assessment by Fed Chairman Ben S. Bernanke, who said in a Dec. 1 speech that “market functioning would have been more seriously impaired in the absence of our actions.”

“We do think it’s generally been helpful in making the deleveraging process more orderly than disorderly,” Dudley said during a session at an economics conference. Several New York Fed economists presented research showing the effectiveness of three of the central bank’s lending programs.

Stanford University economist and former Treasury undersecretary John Taylor, speaking at the same session, said there is “ambiguity” in the effectiveness of one program, the Term Auction Facility, which lets commercial banks bid on loans. For the Primary Dealer Credit Facility, which lets securities firms borrow from the Fed, there is evidence that it “does work,” Taylor said.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

Last Updated: January 4, 2009 18:21 EST