WASHINGTON — A heavyweight panel including former bank regulator Sheila Bair cautioned Wednesday that the Federal Reserve must take a clear and steady direction out of its "experimental" monetary policies so as not to further harm the economy.

"The longer we're in" quantitative easing, "the harder it is to get out," Bair, the former chairman of the Federal Deposit Insurance Corp., said during a discussion on "Rejuvenating America's Economy" at the National Press Club. The Fed "needs to get out on a very, very gradual slow basis … and hopefully, that will be combined with better leadership with our elected officials on fiscal policy."

The Fed took up a majority of the discussion on the economy, but panelists also said a lack of fiscal policy among lawmakers and a dependence on the financial markets were holding the economy back.

"We need to realize that, right now, we don't have a financial service industry that supports the economy enough," said Mohamed El-Erian, chief executive and chief investment officer of the global bond investor Pacific Investment Management Co. "We have to go back to genuine drivers of growth instead of this love affair that we had with leverage and debt entitlement because that's going to just put us into another crisis down the road."

In discussing leverage, Bair said she was disappointed that the Fed recently proposed a new leverage ratio capital requirement of at least 6% for banks instead of her preferred 8%. She again urged lawmakers and regulators to consider breaking off the securities and derivatives activities of megabanks from the traditional banking operations, especially from insured deposits. Bair strongly supports several legislative proposals to break off the investment arms of big banks.

"A complete split by statute would be fine by me too," Bair said. "I haven't pushed that far, but again, I think it's tremendous that the bill has been introduced. It's good directionally. It goes in the right place and I think it puts more pressure on regulators to do more."

Bair also addressed comments by Attorney General Eric Holder in the Wall Street Journal Wednesday where he vowed to go after culprits of the financial crisis before leaving his post. Bair encouraged all regulators to crack down on the industry, but said she feared political pressures would complicate the process.

"I do wish there had been a more robust enforcement policy, not just with the Justice Department but with some of our regulatory agencies," she said. She said she would encourage actions "when it's consistent and designed to send clear signals about unacceptable behaviors … not so much when it's looking into more discretionary types of things or in response to political pressure."

Still, most of the discussion centered on monetary policy matters. How the Fed unwinds from years of quantitative easing and bond buying was a huge concern for panelists, including John Taylor, professor of economics at Stanford University.

"The No. 1 thing should be that we get back to normal policy. We've had good monetary policy for 20-plus years. It worked very well in this country but we've gotten off of that," Taylor said. The Fed "can say if not now, when. It's not going to be easy. That's what we warned about way back when but that's what this economy really needs is predictability about policy."

Taylor said that the Fed should at least lay out a plan that includes tapering off bond purchases and then raising the interest rate from zero, though he did not specify a timetable.

"At this point, people really need to realize we don't know the impact of these policies," Taylor said. "It is experimental and as I look at them, I'd see them as actually, basically negative."

Taylor was full of advice for the Fed, but when asked about the rumors of his being a potential candidate for the next Fed chairman, he gave a firm "absolutely not."

"You know, one thing that's great about our country is we have this civil society where people can be on the outside and comment and criticize," he said. "And I think I'm very comfortable with that."