Block the bishop with the king or queen pawn and bring your horses out.

omg, finally a refutation to the fried liver

Why didn't decades of theory ever think of this?!!

I'm not sure how you will block with your king pawn though, and your knights will already be out.

I did hear TheBackyardProfessor had an excellent video on this defence.

Oh, the one where he is condemning "random 2 piece attacks" and responded to Qf3+ with Ke8 and after Bxd5 claimed he had a clear advantage. 

Let me be helpful for a change

or

Thanks so much for the comments and for the two move by move variations on defense. Also blocking the bishop with the queen pawn not the king pawn seems a better idea.

It seems the only idea, pawns can't move backwards.

I prefer just to play 3...Bc5 rather than Nf6 and avoid it entirely.

It also has the advantage of being a legal move. 

I have also noticed that when i go for the fried liver attack first i am able to see how my opponent counters and quickly neutralizes the attack. Either that or I have a quick 4 move checkmate. For the record it has only worked once. Also i find that when i try fried liver my pieces dont get developed and i forfeit control of the center.

I go ya one futher and play 3. ...Be7 and avoid ALL those nasty white gambit lines and sharp attacking systems...Black does not get to attack f2 as much as he likes (it's a great fantasy, tho ) and the Bishop often needs to go back to e7 anyway (in some Guicco) lines...despite engines telling one white is clearly better, the advantage dissipates over time as we reach the engine horizon, and the Hungarian forces white to play a more Spanish like positional game than is usuall;y the case in the Bc4 lines.  Since most players with white pieces are playing Bc4 to AVOID the Spanish systems, this gives black a little psychological advantage.

Black's position is solid and harder to crack than in the Bc5 lines. 

Ugly

re: 3... Be7, better be careful of this:

That's a line from the Scotch gambit, It seems like white wins a piece on the spot but that's not the case, white has to give the bishop back to defend against black's threats.

Either Bxg7 followed by Nxc3, or Nxc3 immediately

here is one matt...

I always thought moving that pawn forward was a good idea.