Both the Fed and the Treasury Department have been working overtime recently to stem what is now a global financial crisis that only seems to be growing.

It started with a wave of “write-downs” by Wall Street firms who stuffed their portfolios with now toxic mortgage-backed securities, and other debt instruments related to America’s down housing market. Fears spread as the very financial system itself appeared in danger of collapse when a wave of big banks started to be insolvent, because it seemed everyone had placed bad bets on real estate.

That in turn, led to a freeze on credit — the very engine that funds the day-to-day operations of businesses all over the country. Banks stopped lending to each other and tightened lending standards to the public. That caused panic in the stock market — with Monday alone seeing an 800 point drop in the Dow during the trading day before closing higher, but still below the 10,000 mark.

Now, that fear has spread the world over, with stocks in Asia and the Middle East tanking, and markets in Europe struggling to stay out of the red as the continent deals with its own bank failures.

All this has forced the Federal government to act to avoid a wider financial contagion, by deploying a wide array of tools to help calm the economy — some of them unprecedented. Let’s take a look at some of what’s being done:

1. Buy up short-term debt: In an unprecedented move, the Fed announced Tuesday that it will now provide cash to companies by buying up unsecured and collateralized short-term debt, otherwise know as “commercial paper,” so businesses can fund their day-to-day operations with credit that had been frozen by banks.

2. Bail out financial firms: On Friday, Congress passed a bill to buy up to $700 billion of toxic securities from struggling financial firms, so they can remove these now practically worthless securities from their balance sheets, shoring up confidence in financial institutions.

3. Guarantee bank buyouts: This has been done on several recent occasions, where Fed officials negotiate buyouts with fiscal guarantees from the government, including the buyouts of Washington Mutual by JPMorgan Chase and Wachovia by Citigroup (now being challenged by rival Wells Fargo), or by lending money to insurance giant AIG in return for a large stake in the company.

4. Inject funds into the system: Last month the Fed injected $180 million in additional funds into the banking system, in conjunction with several other central banks around the globe, to increase cash “liquidity” in a bid to get money flowing in the economy

5. Trim borrowing costs: The Fed has cut interest rates several times in recent months, bringing the Fed Funds Rate down to 2 percent. Now some are predicting that another rate cut could be in the works by as much as half a percentage point; and, under new legislation passed last week, the Fed now has the power to set a floor under its main interest rate on bank reserves that some are calling a cut by “stealth.”

Even with all these tools being deployed, the near future remains uncertain. The bailout did not have as positive an effect as many expected, and some speculate that, while it may prop-up the U.S. economy, it could do damage to economies abroad. Global stock markets could take a nosedive several more times, before we’re out of the woods.

Still, the Fed and the Treasury have been proactive and tireless, creating new and sometimes untried tools to fight off a more drastic economic downturn. Not since the Great Depression has the federal government been so entrenched in trying to secure the nation’s economy.