From the conclusion to "How Effective is Fiscal Policy Response in Systemic Banking Crises?", by E. Baldacci, S. Gupta, and C. Mulas-Granados:

This paper assessed the effects of fiscal policy responses during 118 episodes of systemic banking crises in advanced and emerging market economies. The results indicate that timely countercyclical fiscal responses (both due to discretionary measures and automatic stabilizers), accompanied by actions to deal with financial sector weaknesses, contribute to shortening the length of crisis episodes. During crisis caused by financial sector distress, fiscal expansions increase the likelihood of earlier exit from a shock episode. Expansionary fiscal policies reduced the crisis duration by almost one year. These results hold for different definitions of crisis duration and alternative specification and estimation methods. The findings are consistent with recent studies that highlight the importance of countercyclical policy in response to recessions associated with financial sector problems (Classens, Kose, and Terrones, 2008; IMF, 2009b; IMF, 2009c).

Initial fiscal conditions matter for fiscal performance

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Do government bailouts in times of banking crises work? Crises like this are manageable. They're expensive and painful to resolve, but even more expensive and painful when left to fester.

Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is not the most effective and efficient way to recapitalize the banking system. Such recapitalization - via the use of public resources - can occur in a number of alternative ways: purchase of bad assets/loans; government injection of preferred shares; government injection of common shares; government purchase of subordinated debt; government issuance of government bonds to be placed on the banks' balance sheet; government injection of cash; government credit lines extended to the banks; government ...