With a new year of recession-fighting upon us, it's a fitting time to do a performance evaluation of America's policymakers. How well did they handle a true crisis? The credit-market crisis that erupted in early September has been aptly described as a once-in-a-lifetime event that quickly reverberated through the global financial system, bringing it uncomfortably close to a complete meltdown. Along the way, it wreaked havoc with economic growth, throwing most of the industrialized economies into a deep recession.
Such a tumultuous environment calls for unusual and sometimes extreme measures by policymakers to cope with a unique set of complications. So how have America's twin pillars of economic policy, the Federal Reserve and the Treasury, fared in their response to contain the crisis? There is no single answer to that question -- in fact, there are two, because the quality of their response to the crisis could not have been more diverse.
The Fed, on balance, has shown forcefulness, imagination and steadfastness in dealing with the financial market turmoil, while the Treasury's response has been largely sluggish, unfocused, and woefully incoherent.