No I am not paying tribute to R.E.M. and Michael Stipe, but instead trying to capture the prevalent sentiment of the main decision makers in the fall of 2008 as portrayed in the HBO movie Too Big To Fail.
I found the movie and the supporting materials frustrating for a variety of reasons, but I do not doubt that the portrayal of the beliefs of those in positions of power is fairly accurate.
As I watched the movie I was impressed on how the interweaving of real news clips from 2008 with the actor portrayals was done so seamlessly. I find it amazing how Barney Frank escapes in this (and so many other discussions) unscathed when he is so culpable for what he did to compel banks to lend and his stance on Fannie and Freddie. And rather than heroic, I consider the behavior of Paulson and Geithner to be perhaps the best example of what Ayn Rand called "The Aristocracy of Pull". They are political actors, not market participants. (This is especially evident in the scene where they bring all the banks in, and explain the US government 'take over' --- when pushed why a solvent bank should sign, Paulson pointed to the head of FDIC and simply said that if you refuse to sign bank auditors will visit your bank and show that your bank is not as strong as you believe --- this is said in the movie almost in a whisper and passed over quickly, but it is the full force of the state being brought to pressure others into doing what they otherwise wouldn't do).
Bernanke's portrayal in the movie fits with my own interpretation of his behavior --- he sincerely believes the credit transmission mechanism was about to shut down completely. In the documentary about the making of the movie Ken Rogoff endorses this Bernanke story, and with the sentiment that we were faced with the end of the world as we know it. Leave no doubt about it, Rogoff says.
But I had, and continue to have, very big doubts about this narrative. If the movie gets people thinking about this and the tremendous power of the state that was entrusted in the hands of a few due to the expediency born of panic, then it will have done its job. But, if the movie leaves the impression that extraordinary men had to engage in extraordinary acts in order to save us from an extraordinary crisis, then it will simply reinforce the mythology of the ruling elite.