>> [MUSIC]
>> Phase four, the crisis begins in early 2009.
I met with the president the week after he was Sworn into office,
and I explained to him that at that point, despite all the things that had
been done in the fall, all the things that caused so much outrage and anger.
The trillions of dollars we'd put into the financial system,
the unprecedented injections of capital into the banking system.
Despite all those things, we still had an economy that was collapsing.
And we still had a financial system that was frozen.
And we had five huge financial bombs that were still fundamentally unstable, and
it was gonna take a bunch of additional action, very unpopular action,
to reduce the risk that they collapsed, adding to the damage facing the economy.
Those five were AIG, Fanny and Freddy, Citi, and B of A.
Still.
Fragile.
Still very unstable.
Symptoms of the fact that the system was still fundamentally frozen, and dangerous.
Why was the economy still so terrible even after all those actions?
It was probably, because of the lags In impact.
Take some time after you do things that have some effect on confidence,
on behavior.
It's probably, because we hadn't used fiscal policy yet, in any meaningful way.
That was the tool left really unaddressed in those first few months of escalation.