10/18/2010 03:36 pm ET | Updated May 25, 2011

Richard Fisher, Dallas Fed President: We Need Help To Save Economy (VIDEO)

The Federal Reserve can't save the economy without help from other parts of the government, Federal Reserve Bank of Dallas president Richard Fisher said.

Speaking on CNBC's "Squawk Box" Monday, Fisher said the Fed's actions won't be effective without cooperation from lawmakers and regulators. Because the Fed controls only monetary matters, such as the value of currency, its contribution is only part of the equation. If the Fed's quantitative easing, for example, lowers interest rates, that won't be enough to drive a recovery: Businesses will also need an incentive to put the cheap money to use.

"The Fed can't do it alone," he said. "Even your local, regional newspaper, the New York Times, said on Sunday, 'Mr. Bernanke can't do it alone.'"

Government regulators, Fisher said, also have an important influence over the economic recovery. And some of their policies, he noted, have done more harm than good. "If some of that noise that comes from fiscal and regulatory policy gets out of the way, then monetary policy would be even more effective than it is now," he said, noting that an impediment to recovery has been "confusion about what regulation is going to be."

If the economy is in a "liquidity trap," as Chicago Fed president Charles Evans said Saturday, then lower interest rates, which are controlled by the Fed, won't do much good unless they are combined with policy that encourages companies, which Fisher said are in a "defensive crouch," to spend money rather than simply hoard it. Money is cheap in a liquidity trap scenario, but, paradoxically, it doesn't get used.

"A lot of liquidity has been built up," Fisher said. "When's it going to be put to work to hire people?"

With the main interest rate currently near zero, companies have borrowed money cheaply, but many aren't putting that money to use. It's a practice that helps the companies themselves but doesn't boost the larger economy.

"I think it's very, very important that you incentivize the people that hire," Fisher said, according to CNBC's transcription.

He noted, though, that there isn't one, simple solution. Taking a cue from Pimco managing director Neel Kashkari, who appeared on the show, Fisher said, "I think that's the key -- there is no magic bullet."

WATCH the interview, in two parts, below: