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"Everything solid in the American economy turned out to be built on sand," said George Packer at The New Yorker. The collapse of the investment bank Lehman Brothers 10 years ago presaged a crisis that had "a lasting impact on American political life." Following Lehman's failure, the Federal Reserve stepped in as banks such as Citigroup seemed on the edge of collapse, and corporate giants like General Motors and Chrysler teetered. "The speed and scale of destruction were so breathtaking that only the direst analogies seemed adequate." A combination of reckless lending, Wall Street gluttony, blatant fraud, lax government oversight, and deregulation led to the catastrophe. Millions lost their jobs and retirement accounts as the financial crisis gradually became a foreclosure crisis, said Joe Nocera at Bloomberg. As home values slipped, owners with subprime mortgages often discovered they owed more to their lender than their home was worth; foreclosures hit 3.2 million in three years at the peak of the crisis. Wall Street arrogantly derided those who subsequently lost their homes as having themselves to blame. But many were simply economically vulnerable, "one financial setback away from trouble."
"President Trump's election was a direct result of the financial crisis," said Andrew Ross Sorkin at The New York Times. The bitterness now infecting American politics was fed by "financial despair" and exacerbated by the glacially slow recovery. The public has grown increasingly distrustful "of the very idea of experts and expertise," and this wariness ushered in new political movements. Those who lost faith in the government drifted to the Tea Party, and those with a disdain for corporate America drifted to a surging socialist left. When disaster hit, said Glenn Hubbard at The Wall Street Journal, the government's concern for ordinary people facing unemployment and foreclosure was "tepid." It should have refinanced mortgages en masse. Instead, policymakers were more interested in bailing out the banks. That response drained the public's pocketbook and confidence.
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Actually, it could have been much worse, said Matt O'Brien at The Washington Post. "If nothing had been done, almost every major bank would have collapsed, and otherwise solvent companies wouldn't have been able to borrow the money they needed to meet payrolls or manage the rest of their day-to-day operations." The Fed would have had to replace key parts of the financial system "just so that we could have continued to have an economy." The problem is, millions of Americans haven't experienced the recovery, said Lydia DePillis at CNN. Homeownership rates have only now slowed their downward spiral. Men's workforce participation is as low as it's ever been. And thanks to the lingering drought in mortgage and construction lending, we're still enduring a housing affordability crisis. Congress has already loosened most financial rules "put in place to fix and prevent the problems" of 2008. Combine that with a surging national debt and budget deficit and it's not hard to envisage how another financial crisis could be closing in.
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