The Dow and the Nasdaq at 5 and a half year lows, the S&P at an 11 and a half year low.

GDP growth was contracting at the fastest rate in 50 years.

And the economy was losing hundreds of thousands of jobs each month.

So the Fed stepped in.

Nine years later, the economic picture looks very different.

So did the Fed do the right thing during the crisis?

So we did the right thing, I hope. We tried to do the right thing.

Ben Bernanke was at the helm of the Fed when it embarked

on a series of stimulus measures during the global financial crisis.

One of the most well-known things Bernanke's Fed did during the crisis was quantitative easing or QE.

For central banks like the Fed, QE is a little bit like an extra tank of gas for a car that's run out of fuel.

It's an extreme measure taken by central bankers to pump money back into the economy.

Generally when the economy is in bad shape the Fed lowers interest rates.

Lower interest rates encourage people or companies to borrow and spend their money instead of saving it.

But in November 2008, interest rates were already close to zero.

So the Fed launched a round of QE.

It bought trillions of dollars of mortgage-backed securities and government bonds.

When the Fed buys a lot of bonds, their prices go up and yields or interest rates go down.

You can see in this chart the Fed's balance sheet, the value of its assets,

ballooned from around $900 billion in 2008 to $4.5 trillion in 2015.

After its first QE announcement in November 2008, the Fed launched two more rounds of easing.

Nine years later, many, including those inside the Fed, argue the central bank's policies saved the economy

from a crisis worse than the Great Depression.

The U.S. economy has recovered more than 10 million jobs since November 2008.

And workers' wages are ticking up.

GDP growth has bounced back and held steady around 2%.

There's evidence QE lowered interest rates,

which helped ordinary people borrow cheaply for things like home mortgages.

Another sign QE worked is that other central banks, like the European Central Bank and the Bank of England,

followed the Fed's lead and launched their own easing programs.

But maybe the best sign that the Fed was successful was in its criticism.

The Fed has faced plenty of opposition for its actions, including from members of Congress.

They say the Fed intervened in markets to boost stock prices, making bubbles,

like the ones that helped create the crisis in the first place, more likely.

Stock markets have surged more than 200% to record highs.

Some contend those returns have mainly benefited the richest 1% who invest the most money in stocks.

Critics also say the Fed's low-interest rate policy put people with savings accounts at a disadvantage.

There's a lot less incentive to put money into savings when you earn very little interest on it.

Which is why some investors looked for other, riskier, places to put their money with bigger returns.

By keeping interest rates low, the Fed made it inexpensive

for the government to continue to borrow and spend.

U.S. public debt is now close to $20 trillion and some fear that bubble could burst

as the Fed steps out of the government market.

Some of the most vocal critics feared QE would cause runaway prices,

but inflation has stayed stubbornly low.

The Fed is now facing a new frontier, unwinding its $4.5 trillion balance sheet.

It's a monumental task and it's one that other central banks will be watching closely.

The Fed doesn't really need that extra tank of gas anymore, the question is if the car can run without it.

In September 2017, the Fed announced its plan

to gradually wind down its balance sheet, basically to let the gas drip out.

It will do this by allowing its securities to mature without replacing them with new assets.

So for example,

if the Fed owned a 10-year Treasury note that bond would expire after, you guessed it, 10 years.

In the past the central bank would have reinvested, basically exchanged,

that Treasury before the 10-year mark. So its total holdings stayed constant.

Now, from October to December of this year, the Fed will let about $10 billion worth

of Treasury and mortgage bonds expire each month instead of exchanging them.

The Fed will slowly increase that monthly amount over the next year.

This whole process is a first for the Fed.

So did the Fed do the right thing during the Great Recession?

The answer might depend on how the global economy responds to its great unwinding.

Hey guys it's Elizabeth. Thanks so much for tuning in.

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