Are We Safe Yet?

How to Manage Financial Crises

Geithner and Obama with financial leaders at the White House, December 2009. Larry Downing / REUTERS

The 2008 financial crisis was the most damaging economic event since the Great Depression, for both the United States and much of the global economy. Although the U.S. economy emerged from it more quickly and in better shape than many other economies did, the crisis imposed tragically high costs and left deep economic and political scars. To help prevent another crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. These and other reforms have added a considerable margin of safety to the U.S. financial system.

But how safe is that system today? The answer is important, because although the United States may not face a major crisis anytime soon, it is certain to at some point. The choices policymakers make in advance of that event and in the moment will have a major impact in determining the magnitude of the economic damage. Indeed, the U.

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