The standard narrative is that the rescue operation succeeded in stabilizing the financial system. The U.S. economy rebounded, spurred by a fiscal stimulus that the Obama Administration pushed through Congress in February, 2009. When the stimulus started to run down, the Fed gave the economy another boost by buying vast quantities of bonds, a policy known as quantitative easing. Eventually, the big banks, prodded by the regulators and by Congress, reformed themselves to prevent a recurrence of what happened in 2008, notably by increasing the amount of capital they hold in reserve to deal with unexpected contingencies. This is the basic story that Paulson, Bernanke, and Tim Geithner, who was the Treasury Secretary during the Obama Administration, told in their respective memoirs. It was given an academic imprimatur by books like Daniel Drezner’s “The System Worked: How the World Stopped Another Great Depression,” which came out in 2014.
This history is, on its own terms, perfectly accurate. In the early nineteen-thirties, when the authorities allowed thousands of banks to collapse, the unemployment rate soared to almost twenty-five per cent, and soup kitchens and shantytowns sprang up across the country. The aftermath of the 2008 crisis saw plenty of hardship—millions of Americans lost their homes to mortgage foreclosures, and by the summer of 2010 the jobless rate had risen to almost ten per cent—but nothing of comparable scale. Today, the unemployment rate has fallen all the way to 3.9 per cent.