John Cassidy does a nice job summarizing how we get here with a focus on Bernanke and the evolution of his view of the Fed. One of my favorite parts is when Bernanke suggests that it’s time for Congress to get involved via the bailout:
Paulson agreed. A bailout ran counter to the Bush Administration’s free-market
principles and to his own belief that reckless behavior should not be
rewarded, but he had worked on Wall Street for thirty-two years, most
recently as the C.E.O. of Goldman Sachs, and had never seen a financial
crisis of this magnitude. He had come to respect Bernanke’s judgment,
and he shared his conviction that, in an emergency, pragmatism trumps
It almost always does.