Question

In September 2008, Fed chairman Ben Bernanke contacted the Treasury Secretary to ask for help in dealing with the growing financial crisis, causing Congress to create TARP and bail out the banks, insurance companies, and even General Motors, resulting in a massive increase in the deficit. Was getting Congress involved necessary or could the Federal Reserve have done all the heavy lifting? Which is more important in solving a financial crisis, monetary policy or fiscal policy?

Answer 1

Getting Congress involved was also necessary along with Federal Reserve doing its part, because the Federal Reserve could not single handedly control the 2009 recession, as it was of very high intensity.

Both monetary and fiscal policies must be implemented in order to pull the economy out of recession, since the intensity of the recession was widespread and was also spreading to all the parts of the economy. It was important to curb those effects immediately from all angles and thus both fiscal and monetary policies were needed to bring the economy back to normal.