secretary . We can be confident , I always answered , that there will not be another Great Depression because policymakers have read financial histories like mine . At least that was my line until recently . Now I have stopped taking reporters ' calls . The first thing that made the Great Depression great , of course , was the Fed 's failure to act . It basically stood by as the banking system and the economy collapsed around it . This time , in contrast , the Fed can hardly be criticized for inaction . Not only has it cut rates , but it has rolled out one new unprecedented initiative after another . Unfortunately , it has reacted more than acted . First , it provided funds to the commercial banks . Then , it targeted broker-dealers . Now , it is desperately propping up the commercial paper market . All the while however , the problem has been infecting new parts of the financial system . One thing that restrained the Fed in the 1930s was the fear that rate cuts might cause capital to flee to other countries and the dollar to crash . The
Editor 's Note : Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California , Berkeley . He is the author of `` Golden Fetters : the Gold Standard and the Great Depression , 1919-1939 . '' Barry Eichengreen says strong action should be taken to stop the financial crisis from getting worse . BERKELEY , California -LRB- CNN -RRB- -- Every time the economy and stock market turn down , financial historians get predictable calls from reporters . Could this be the start of another Great Depression ? Could `` it '' possibly happen again ? My stock answer has always been no . The Great Depression resulted from a series of economic and financial shocks -- the end of a housing bubble in 1926 and the end of a high-tech bubble in 1929 -- but also from truly breathtaking neglect and incompetence on the part of policymakers . It could n't happen again precisely because policymakers know this history . Fed Chairman Ben Bernanke is a student of the Great Depression . Treasury Secretary Henry Paulson remembers the mistakes of Andrew Mellon , Herbert Hoover 's treasury