Some also suggest that the current approach still has several gaps -- including more direct efforts to shore up home prices and reduce foreclosures, and more coordinated international initiatives to restore confidence in the global banking system, largely by providing banks with capital and insuring deposits.
Many of the steps already taken involved authority that existed but was seldom used. Some, such as the Treasury's ability to take direct equity stakes in banks, involve new powers.
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Financial emergency
Other steps require explicit findings of an impending financial emergency. The Fed's ability to provide capital to some corporations or partnerships may rest on a vote by its board that "unusual and exigent circumstances" exist in the credit system, according to the Federal Reserve Act.
A plan to allow the Federal Deposit Insurance Corp. to insure all bank deposits -- beyond the limit of $250,000 per depositor written into the economic stabilization bill this month -- would require a multi-agency finding that "systemic risk" threatens the economy.
But financial experts believe that it would go far toward shoring up public confidence in the banking system, as well as giving banks more comfort about lending to one another.
In any event, obtaining the necessary findings from the Treasury, Fed and FDIC may not be much of an obstacle, given the urgent atmosphere in the financial markets.
Many experts praise Paulson and Fed Chairman Ben S. Bernanke for their creativity in addressing the crisis.
"They've been creating and refashioning tools on a daily basis," said Cornelius Hurley, a banking and financial law professor at Boston University. "It's been breathtaking to see them reach into their tool kit."
Few policymakers are as familiar with the size of that tool kit as Bernanke, a longtime student of Fed policy. Addressing an audience of economists in 2002, when he was a Fed governor but not yet chairman, Bernanke outlined the almost unlimited authority of the Federal Reserve to protect the U.S. economy from harm.
The central bank could inject money into the economy by purchasing almost any asset -- government bonds, corporate bonds, foreign debt or other assets -- to manipulate interest rates and capital flows, Bernanke said. Even in the most extreme circumstances, he said, a determined central bank would "most definitely not run out of ammunition" to maintain economic activity even in harsh recessionary conditions.
