On the brink of crumbling a decade ago, America’s financial system was saved by an extraordinary rescue that revived Wall Street and the economy yet did little for individuals who felt duped and left to suffer from the reckless bets of giant banking institutions.
The government intervention shored up the banking system, allowed credit to flow freely again and helped set the economy on a path toward a painfully slow but lasting recovery from the Great Recession.
In the process, though, millions endured job losses, foreclosures and a loss of financial security and struggled to recover with little outside help. For many, faith in homeownership, the financial markets and a government-provided security net never quite felt secure again.
Even with the economy roaring this year, 62 percent of Americans say the country is heading in the wrong direction, according to an August survey by The Associated Press and the NORC Center for Public Affairs Research.
Still, by pretty much any measure, the picture was far bleaker a decade ago. Home prices had sunk, and mortgages were going unpaid. Layoffs had begun to spike. The tremors intensified as Lehman Brothers, a titan of Wall Street, surrendered to bankruptcy on Sept. 15, 2008. Stock markets shuddered and then collapsed in a panic that U.S. government officials struggled to stop.
Desperate, the government took steps never tried before. It flooded the economy with $1.5 trillion in stimulus over five years. To keep loan rates low, the Federal Reserve slashed its benchmark rate to a record-low near zero and bought trillions in Treasurys and mortgage bonds. Stricter rules, intended to prevent a future catastrophe, were passed.
Stocks not only recovered; they soared. Unemployment plunged from 10 percent to the current 3.9 percent, near a 50-year low.
The stock market gains, though, flowed mostly to the already affluent. Homeownership, the primary source of wealth for most American households, declined.
And while risky mortgages are much less common, student debt has exploded. Anxiety persists as racial and political tensions have intensified in a nation that is increasingly diverse and cleft by a widening wealth gap.
Josh Boak, The Associated Press