The ongoing financial crisis has been an extremely painful experience. The unemployment rate is up about 5 percentage points since the beginning of the recession and is widely expected to rise further. Real output has fallen by nearly 4% over the last four quarters, more than any previous four-quarter decline over the postwar period. This is not the first time that a financial crisis has had effects of this magnitude. Among developed economies, the stock market crash of 1929 and the subsequent Great Depression is the first thing that comes to mind. The collapse of Japanese financial markets in the 1990s offers another example. One wonders if something could have been done to prevent these events or at least mitigate the losses.