Today, the 4th anniversary of the bankruptcy of the 158 year old investment bank Lehman Brothers, our country and tens of millions of Americans continue to suffer from what is correctly called the Great Recession: it is the worst economy the country has suffered from since the Great Depression of the 1930s. That is a direct result of Wall Street causing the worst financial crisis since the Stock Market Crash of 1929. The cost of those financial and economic crises so far is no less than $12.8 trillion dollars, including lost gross domestic product, destroyed household wealth, unemployment and under-employment, foreclosures, government bailouts, emergency spending measures, and other actions necessary to prevent a second Great Depression. The consequences of those events touch every corner of our country, including many of our neighbors who will sit at their dinner table tonight, look their children in the eye, and worry about their future, for good reason:
- 23.1 million Americans today cannot find full time work.
- 9.3 million Americans have lost their health insurance.
- 11 million homeowners—almost 1 in 4—are saddled with mortgages higher than the value of their homes.
- Home values have fallen to 2002 levels, destroying $7 trillion in homeowner equity.
- 3.7 to 5 million foreclosures have already forced millions of American families to move out of their homes and millions more foreclosures are in process.
- The American family’s net worth plummeted almost 40% in just three years, from 2007-2010, wiping out almost two decades of hard work and prosperity.
- Zero interest rates have prevented families from rebuilding their net worth, either by savings or investments, because yields are historically low or even negative.
- Trillions of dollars that were spent, lent, pledged, guaranteed, or otherwise used by the government to bail out the financial system and respond to the resulting economic crisis
- dramatically increased the annual deficit ($1 trillion plus) and the national debt ($8 trillion), and, thereby,
- depleted the government’s ability to maintain the social safety net and respond to the greatly increased needs arising from the Great Recession.
All of that—and much more—adds up to more than $12.8 trillion.
In fact, even $12.8 trillion dramatically understates the true costs of the crises, not only because that number does not include every cost, but also because so much is simply unquantifiable. For example, the ultimate immeasurable cost is not included: preventing the complete collapse of the financial system and a second Great Depression or worse, which undoubtedly would have cost many tens of trillions of dollars more. There are also the many incalculable costs of unprecedented government actions that enabled that outcome: the federal guarantee of the $3.7 trillion money market industry, which stopped a run on those funds and the liquidity crisis in short term funding that it caused; the extraordinary overnight conversion of the two largest investment banks into bank holding companies giving immediate access to all the highly favorable federal bank programs, which prevented their bankruptcy; and, most important, the literally priceless full federal guarantee of the entire financial system in February 2009, which almost certainly—in combination with all the other emergency measures—prevented the full collapse of the financial system and another Great Depression.
Then there are the enormous unquantifiable costs from the economic wreckage Wall Street caused from one end of our country to the other. For example, unemployment, bankruptcies, foreclosures, and underwater homes have destroyed many neighborhoods and communities across the country, while decimating the tax base of cities, towns, counties, and states. Added to that are the demoralizing and gnawing invisible costs of anguish, anger, depression, and often humiliation from losing a job and failing to provide for a family; being forced to move out of a home, often to move in with relatives or friends, but sometimes to move into a car or homeless shelter; watching your children get sick with no ability to go to a doctor or pay for a prescription; signing up for food stamps and having your children get free school lunches that you can no longer afford; having to break it to your children, who have worked so hard in school, that college is no longer affordable and they have to get a job, any job, as soon as possible sible; or your spouse finding out that you aren’t retired but working at a low paying,
often minimum wage, job because you need the money. This list sadly goes on and
on, including spouse, child, alcohol, and, too often, drug abuse.
This Report details many of those costs, but first it is necessary to review the events that gave rise to those costs and then discuss why the process of understanding, cataloging, and aggregating these costs is so critically important. [Continue reading from the report]