Dallas Fed President Richard Fisher said the rate cuts delivered by the Federal Reserve have not been fully passed on to borrowers during a speech in San Antonio, Texas.

Fisher said "breakdowns" in regulation contributed to the current crisis and that the economy continues to suffer from a "bout of anemia."

"The U.S. economy will continue to suffer from a bout of anemia while the housing and financial markets settle down," he said, noting he "takes comfort" in knowing markets will eventually correct if the Federal Reserve does its job "and other regulators and fiscal authorities do theirs."

"Even in the egocentric present, when gloomy analysts lament �unprecedented problems,' we must never lose faith in the economic machine that has propelled the U.S. economy to unprecedented prosperity," he said.

He also said the crisis in the housing sector may not yet be over and that past experience shows asset prices "overreact" in busts.

The Fed president said too much liquidity will contribute to inflation.

By Stephen Huebl and edited by Nancy Girgis