Two days after U.S. officials decided to let Lehman Brothers collapse in September 2008, and just before the Federal Reserve unleashed a torrent of programs to bolster the financial system, central-bank officials were still struggling to grasp the magnitude of the calamity that had hit the economy.

"I think that our policy is looking actually pretty good," Fed Chairman Ben Bernanke said of the level of interest rates at a closed-door Fed policy meeting on Sept. 16, 2008, according to transcripts of its policy meetings...