After stepping in to rescue progressively heftier Wall Street giants - Bear Stearns, Frannie Mae & Freddie Mac, and AIG - the Fed turned to Congress asking it to okay a bailout to - hopefully - end all bailouts. Congress complied in early October '08, greenlighting the Fed to give up to $700 billion (to be given in three installments) to ailing financial firms.
Although the bill looks like it's a bailout for irresponsible financiers, the rationale behind injecting money into Wall Street is that it will ward off a credit freeze - which could push us all into a deep recession. With financial firms spooked by toxic securities, they are increasingly worried about extending credit to other firms; a credit freeze on Wall Street eventually translates to dried up credit for the rest of America. By cushioning the cash flow of weak firms, however, a bailout hopes to give Wall Street the confidence to start lending again.
With signs that the fracturing real estate market was putting a damper on the economy, Congress passed a $152 billion stimulus package in early '08. It may sound like chump change when compared to the nearly $800 billion Congress pumped into the economy in early '09, but that doesn't mean the package wasn't heatedly debated. Below is an archive of that debate.
the debate over the '08 stimulus
Not all economists agreed a stimulus package was necessary (or would be effective). For those gung-go on an immediate boost, however, "targetted, timely and temporary" was the going mantra on Capitol Hill - getting cash to consumers and producers as soon as possible and with the biggest bang for the buck. Still, there were different schools of thought on what were the best ways to target cash back into the economy.