I want to show that $$\Gamma_0(4) = \biggl\{\gamma = \pmatrix{a&b\cr c&d}\in {\rm SL}_2({\bf Z}) : c\equiv 0\pmod 4\biggr\}$$ is generated by the three matrices $$\pmatrix{1&1\cr 0&1},\quad\pmatrix{1&0\cr 4&1},\quad\hbox{and}\quad\pmatrix{-1&0\cr 0&-1}.$$ I tried to do this by showing that note that for any $\gamma = \bigl( {a\atop c}{b\atop d}\bigr) \in \Gamma_0(4)$, we have $$\pmatrix{a&b\cr c&d}\pmatrix{1&-n\cr 0&1} = \pmatrix{a & b-na\cr c&d-nc}\qquad\hbox{and}\qquad \pmatrix{a&b\cr c&d}\pmatrix{1&0\cr -4n&1} = \pmatrix{a-4nb & b\cr c-4nd&d}.$$ If $c$ is $0$ we are done, since $\gamma$ is in $\Gamma_0(4)$ in this case. Otherwise, if $|c|<|d|$, we can apply the division algorithm to get $q$ and $d'$ such that $|d| = |c|q + d'$ with $|d'| < |c|/2$, and the first transformation applied $q$ times produces a matrix whose bottom-left entry is $c$ and whose bottom-right entry is $d'$. On the other hand, if $d\ne 0$ and $|c|>4|d|$, then we can find $q$ and $c'$ such that $|c| = 4|d|q + c'$ where $|c'| < 2|d|$ and we apply the second transformation $q$ times to get a matrix with bottom-left entry $c'$. In each case, we have strictly reduced the quantity $\min\bigl\{|c|, 2|d|\bigr\}$, so the process must terminate with $|c| = 0$ or $|d|=0$. In the first case we have found an element of $\Gamma_0(4)$, and the second case cannot happen, since it would imply that $c = \pm 1$.
I think this is the right idea except that we're missing the case where $|d|\le |c|\le 4|d|$ (correct me if there are any other holes in the proof other than this). I'm just not sure what to do in this case.