U.S. Federal Reserve Chair Janet Yellen, Nov. 7, 2014
U.S. Federal Reserve Chair Janet Yellen attends a conference of central bankers hosted by the Bank of France in Paris Nov. 7, 2014. Reuters/Charles Platiau

New York Federal Reserve Bank President William Dudley is defending the New York Fed's record as an effective and fair regulator but admits it has made mistakes. Dudley and the Fed came under sharp criticism from members of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, who accused the Fed of being too close to Wall Street.

The appearance Friday on Capitol Hill came a day after the Fed announced it is launching a comprehensive review of its oversight of big banks. Sen. Sherrod Brown, D-Ohio, who chairs the subcommittee, criticized the New York Federal Reserve of doing more to help and protect major financial institutions than it has for average Americans.

"It is bad enough when banks can capture the agencies that regulate them or the Congress that oversees those agencies," Brown said, according to the Cleveland Plain Dealer. "But it is worse when they don’t even have to, because the agencies handcuff themselves, or public servants attempt to curry favor with the companies that they supervise."

But Dudley rejected that characterization, saying though the Fed has not been perfect and could improve in some areas, it is generally an effective and fair regulator.

“I wouldn’t accept the premise that there’s been a long list of failures by the New York Fed since my tenure,” he said after Sen. Elizabeth Warren, D-Mass., asked him whether there is a "cultural problem" at the institution, Bloomberg reported.

The Fed is on the hot seat following a series of incidents that led to it enduring widespread criticism, arising first in September when This American Life and ProPublica released leaked recordings of comments by officials who pushed back against criticism of Goldman Sachs. A number of other reports since have left the Fed in the spotlight, prompting it to announce Thursday it is undergoing a thorough review of policies regarding big bank regulation.

“We are not perfect,” Dudley said in written testimony that largely stated the case the Fed is an effective regulator. “We cannot catch or correct every error by a financial institution, and we sometimes make mistakes.”

But Dudley's main message was the Fed has helped the economy and performed its duties in a manner that has been a net positive for its overall health.

"Due to our efforts, the financial system is stronger and more stable now than it was five years ago," Dudley said.