Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
Topic: Great Recession
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September 13, 2013 at 10:27 AM
Five years ago this weekend, the giant investment bank Lehman Brothers collapsed, ushering in a financial crisis and economic contraction the likes of which hadn’t been seen since the Great Depression. Less than two weeks later, but before regulators decided to back every big financial institution, Seattle’s Washington Mutual was allowed to become the biggest bank failure in American history. Some would say it was pushed, but that’s another story.
Most of the causes of the catastrophe are well-known: Deregulation, “innovations” such as exotic derivatives, shadow banking, securitization of massive numbers of subprime loans, high executive compensation rewarding excessive risk-taking, too much leverage, regulators captured by the industry and a massive bubble enabled by the Federal Reserve. The costs went well beyond those to the financial system. A Federal Reserve Bank of Dallas report estimates that the Panic of 2008 and resulting downturn cost each household between $50,000 and $120,000. Unemployment remains high. Inequality is worse. Beyond the money, trust in institutions and the equal application of the rule of law has been shredded.
In its typical inviting way, Ezra Klein’s Wonkblog offers 13 charts showing what’s fixed and what isn’t five years later. On the Atlantic’s site, James Kwak argues that policymakers have learned little if nothing from the crash. So it’s time for your say:
Read on for some of the best business and economic stories of the week and the haiku…
July 23, 2013 at 11:26 AM
I’ve tried to stop using the term “Great Recession” in favor of “the Panic of 2008.” One reason is that it resembles the recurring financial panics of the 19th century, but another is that it trivializes the devastation of the Great Depression (and we might face worse, too, so let’s not pre-use “great”). And we were a very different country. The Panic wasn’t as bad as the Depression partly because of policy, some wise (the Federal Reserve avoiding deflation) and questionable (the bailout of the big banks, no questions asked; a too-small stimulus). But in addition, even though many still aren’t feeling a recovery, average Americans were much better off than those who contended with the Depression.
The Census Bureau offers data and charts comparing America in 1940 and 2010. The New Deal had provided jobs and eased suffering for millions, and the economy improved substantially as the 1930s progressed (the exception, a recession in 1937 when FDR backed off on the stimulus). But it wasn’t until World War II that we completely recovered. So in 1940, with Pearl Harbor a year away, the median income for men was about $14,890 in 2010 purchasing power; for women, it was $9,220. By 2010, median income was $33,276 for men and $24,157 for women.
Much more of the population lived on farms or rural villages: Nearly 79 percent used an outside toilet and less than 18 percent had running water. Even with the strides of rural electrification from such projects as the Tennessee Valley Authority and Bonneville Power Administration, 31 percent of rural residents had electric lights. In 2010, more than 99 percent of American households had complete plumbing.