The financial crisis was a stress test of our nation, an extreme real-time challenge of a democracy’s ability to act when the world needed creative, decisive, politically unpalatable action. At times, the failures of our political system imposed tragic constraints on our ability to make the crisis less damaging and the recovery stronger. We made mistakes, it was messy, and the damage was devastating and long-lasting. And yet, at the moments of most extreme peril, the United States was able to design and execute a remarkably effective strategy.

“Two administrations—one Republican, one Democratic, with just enough bipartisan support to get a polarized Congress to do its part—managed to do what was necessary to end the crisis and start a recovery. The small group of key policy makers worked together surprisingly well, arguing, agonizing, sometimes agreeing to disagree, but mostly trying to get the right answer and minimize the time wasted on bureaucratic conflict. We saved the economy from a failing financial system, though we lost the country doing it.

“I hope this book will help answer some of the questions that still linger about the crisis. Why did it happen, and how did we let it happen? How did we decide who got bailed out? Why didn’t we nationalize more banks, or let more banks fail? How did we manage to convince the left we were Wall Street’s wingmen while convincing Wall Street we were Che Guevaras in suits? Why didn’t we do more (or less) about the housing market? Why didn’t we get more (or less) fiscal stimulus? Why isn’t the economy booming again? And what really happened with Lehman, anyway? Couldn’t we have put out the fire back then?

“I also hope this book can add to the historical record, help correct some misperceptions that have been entered into that record, and give a sense of what it was like in the fire.

“But there is another reason I’m writing this book. Financial crises are perilous, and this one won’t be the last. Yet the United States has no standing army for fighting financial wars, no Joint Chiefs of Staff, no War College. It also had no playbook for a terrible financial crisis. All financial crises are different, but they have a lot in common, and there are lessons to learn from this extreme one that can help policy makers and the public during the next one. I hope this story can help illuminate these lessons.

—Timothy F. Geithner

Stress Test