Although the Federal Reserve strongly favors private-sector solutions to private-sector problems, the risk of financial instability in the United States and in much of the rest of the world has implied the need to take extraordinary actions on the part of governments and central banks. The complexity of the problems has in some instances required situation-specific responses. Enactment of the Emergency Economic Stabilization Act, especially the Troubled Asset Relief Program, is an important step to deal with a systemic financial problem of historic dimensions. Fortunately, economic policymakers have learned the lessons of history and have intervened while the majority of financial institutions still have adequate capital and liquidity to provide credit to the economy. Timely government intervention, together with the natural recuperative power of financial markets, will lay the groundwork for financial and economic recovery.Business Economics (2008) 43, 8–12; doi:10.2145/20080401
