The case for fiscal and monetary stimulus has never been greater since the administration of Franklin Roosevelt. The difficult question is not whether but how to structure interventionist federal assistance.

Economic historians have preached for decades that Washington allowed too many banks to fail in the 1930s and did not respond quickly or comprehensively enough to underpin credit and spur private spending. Thus governmental actions in the wake of our recent subprime and derivative-led calamity initially have concentrated on shoring up large financial institutions.

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