ay in hThe 2008 market crash was directly responsible for the crash of the housing markets, the banking sector, and the automobile industries of the United States. How did the country get there and who were the people responsible have been questions which in subsequent years have been mostly answered and explained. However, the everyday person and their struggle with the crash and the struggles which continue to haunt many families, are a subject not commonly writ-ten about. The market truly affected these people: the bus driver, the home painter, the mail per-son. “From the ending of 2008 to the end of 2009, the average U.S. households lost nearly $5,800 of their income; during the worst parts of the financial crisis.” The following analysis highlights the burden which the financial crash placed on working class people, and examine the fallacies expulsed by Wall-Street and Washington regarding who was really to blame for the final crisis of 2008.
The toughest time for the economy and for most of U.S. households, came from Septem-ber 2008 through the end of 2009. The troubles in the housing market during this time made it very easy for people to become homeless, and a significant percentage of the population was af-fected by this statistic; in one way or another. The home foreclosures began to push many one-time home owners into renting instead. In many areas the cost of rent, and the demand for hous-ing both went up; all this despite a rising unemployment rate and falling income rates. To try and combat the homelessness problem in many cities, several states tried to implement prevention programs. However, these plans were not always successful in caring for people in need; mostly due to local and state budget cuts. Experts urged the government to do something, since studies found that homelessness had a very negative long-term effect on individuals, especially for chil-dren. The studies also found that having such instability at home lowered the academic perfor-mance of a child, and increased the chances of that child repeating a grade. These studies found that children who were homeless, or had been homeless at one time or another, had severely re-duced highs cool conclusion rates. Ultimately the research concluded that homelessness put chil-dren at a much greater risk for serious health maladies; much greater than that of their non-homeless counterparts.
The Center on Budget and Policy Priorities estimated that the “2008 recession hard-pressed anywhere from 7 to 10 million people into poverty.” An increase in poverty lead to in-creases in hunger; in 2007 it was recorded that “36.2 million Americans, including 12.4 million children, either did not have enough food or feared that they wouldn’t have enough at some point during the year.” During 2008-2008 the number of people who were unsure that they could afford enough food for their families dramatically rose; most of it due to the high food prices and the ongoing recession. During this time, there began to be a very large rise in unem-ployment, as well as the rise in TANF or Temporary Assistance to Needy Families applicants, as well as SNAP or Supplemental Nutrition Assistance Program applicants; this was significant sup-porting evidence for the rise in hunger. Ultimately this left ordinary people with the feeling that once again their wellbeing was far down the list on the political agenda of the United States.
As of February 2, the “government had made commitments of around $12 trillion to companies such as, A.I.G, Freddie Mac/ Freddie May; and spent $2.5 trillion on their total bailout tab.” Many working-class people began to wonder why they weren’t getting bailed out like these institutions; who most felt were responsible for getting the country into a financial mess. As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, “for a family of three, earning a yearly income of $16,530 in 2008, a $3,000 increase in income per person could have moved most people out of poverty. In all “$3000 times 40,000,000 people equaled to $120 billion” at that estimate the bailout/stimulus packages could have been able to help move poor people out of poverty for over 20 years.
In 2013, the Federal Reserve Bank of St. Louis released a report announcing that; after adjusting for inflation, the average US household had only managed to only recover less then 50 percent of the wealth it had lost during the 2008 crash. The report contradicted claims being made by congress in 2012; that there was an economic rebirth happening. Instead of dealing with that issue alone, congress redirected all of its attention to the ongoing problems in the country like the mass unemployment. “The Federal report went on to note that 62 percent of the wealth increased since 2009 had come from increased share values; which were overwhelmingly owned by the rich.” The report showed a country dealing with an uneven wealth recovery, as well as many dealing with unrepaired financial damages.
A main factor in the collapse of household capital, was the collapse of the housing market bubble. This collapse mainly affected lower-income families, for whom the word asset meant their home and personal belongings. Even as the stock market climbed back to record highs in late 2013, the housing market would remain stagnant. The people who earned the least money in the country saw their net incomes fall by an unbelievable 50 percent drop between 2005 and 2009. During that same period, a typical household ranked in the top fifth percent of earners in the nation only saw a reduction of 18 percent. Although the super wealthy saw an eventual re-surgence with the upturn of the stock market, the clear majority of the population did not recover its wealth. During this same time, the top 7 percent of households increased their wealth by over 20 percent on average.
By 2012, more than twenty million people remained unemployed or found themselves underemployed, while wages still fell dramatically. The US census recorded that Between “2007 and 2011, the US median household income steadily decline and did not rise except for a slight bump in 2009” The US governments response to the 2008 crash, was to offer hundreds of mil-lions of dollars in bailouts and billions in free cre dit to big banks and large companies. While the working households who foreclosed on their houses by the millions since 2008, were offered ba-sically nothing. Vast amounts of money was made because of speculation and predatory lending in the housing market; prior to the collapse of the housing bubble. When the house prices col-lapsed, the value of assets owned by homeowners greatly devalued as well. However, while working class household’s incomes were dropping; those who speculated on subprime mortgage and either failed or won were bailed out. Those people who may have perhaps cheated the sys-tem in a way where able to make money during all faces of the crisis ultimately came away with even more money at the end.
According to the Federal Reserve, beginning in July of 2008 to the following March of 2009, the U.S. lost $3.4 trillion in real estate; roughly $30,000 per U.S. household. The country would also report 500,000 additional foreclosures, which began during the height of the financial crisis. Most financial experts and other professionals who have studied the fiscal crisis of 2008, believed that the private sector’s drive for short-term profit was behind the ultimate fall off graze. “More than 75 percent of the sub-prime mortgages in 2006 were issue by private lenders, these firms would make more than 80 percent of the subprime loans to moderate and/or low in-come debtors that year.” While nonbank sponsors made more than 12 million subprime mort-gages which were valued at nearly $2 trillion.
Many were left wondering how the Mayor of New York, Michael Bloomberg, could then say this during a business breakfast in Manhattan on November 1, 2011?
“It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not say-ing I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that. But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”
It was very interesting put not surprising, that the mayor of a city such as New York would come out in full support of the banks; a phenomenon which was not that rare. “Barry Ritholtz in the Washington Post calls the notion that the US Congress was behind the financial crisis of 2008 the Big Lie.” Finding out who was behind the financial crisis will not be the payoff in this re-port. However, the stories and real life events of the everyday people who suffered at the hand of these shady practices and misinformation, and the connections between these two worlds will be.
The crisis brought with it countess stories of loss and heartbreak, and it left an im-pact on the American economic sector which it’s still reeling from. While decisions such as the expansion of the subprime mortgage market back in 1999, were probably made with good inten-tions, they were most likely the catalyst for many of the abuses which occurred during the great recession. When one considers the unreasoned growth of the subprime mortgage market along with the ways lenders were allowed to mislead borrowers, then maybe the financial turmoil of 2008 was not as unforeseeable as many would have liked to believe.
The great recession affected so many people in all various levels of society, however most of the homeowners who were left without their homes were not subsequently bailed out like the big banks were. It was a fair assumption in the early years after the crash that those affected by the fiscal crisis were disproportionately of lower middle class and working class people. One of those people affected by the fiscal crisis was Sheila Ramos, her and her family had flown from Florida to Hawaii after Ramos had fallen behind on the mortgage for her three-bedroom home and was left with nothing but her clothes and her family. On July night 2009, Ramos and her family began living of their land and stared their new life; with no electricity for years to come. Ramos had to care for her two grandsons who were only 10 and 13 at the time. Eventually Ra-mos and her family managed to build a semi-permanent campsite, and eventually got electricity; three years after she moved to Hawaii. It was safe to say that this was not how this 58-year-old grandmother, imagined spending her retirement after working for more than 30 years; nine of which she ran her own businesses. It would get so bad for Ramos and her family, that she was forced to regularly visit local dumps for stuffs she could salvage.
However, things weren’t always that bad for Ramos, she had once owned her own busi-ness in Anchorage Alaska, but in 2004 Ramos’s business went under when a competitor beat her for a contract which had been her principal source of income for over 5 years. Soon after Ramos left for Florida with her grandchildren and her widowed mother. Ramos and her family relocated on the Gulf Coast of Florida, about two hours north of Tampa, in a community called Pine Ridge. The new community she moved into seemed to be a dream at first, with nice homes and plenty of lavish amenities for her family to enjoy. At first Ramos could afford this due to an am-ple amount of money which she had gotten from the sale of her parents home, the family was able to buy the home with no mortgage, and no debt. However, because of bad investments and a receding economy, Ramos would have to foreclose on her home, and move out of the state on-ly a few years later.
Sheila Ramos story of loss was not an unusual one, this was a story of how America and its people ended up in a crisis which forced millions of families from their homes, and had ever-lasting consequences. By the beginning of 2007, many banks had already begun to foreclose on more than 4 million homes. Ramos’ story was not unique; however, it did not fit any of the con-ventional narratives since Ramos was not a helpless victim. Sure, she had made mistakes, but she didn’t take out a mortgage just to binge on extravagances, or add a new state of the art theater in her house. Her loan was taken out, so Sheila could live the free-market dream, a dreamed shared by millions of Americans; the dream of starting one’s own business.
Ramos had to take out mortgages to cope with injuries suffered during an unexpected crr crash. From her first loan to her foreclosure, her ultimate financial descent was worsened by a mortgage industry so profit-driven, and disconnected from homeowners, that the trust between lenders and borrowers was cut off. Through abuse and distrust, the country’s largest financial institutions succeed in pushing the United States into the worst economic crisis it had ever faced. Even when a borrower tried working their way out of trouble, it always proved to be more diffi-cult than expected for borrowers like Ramos. People like Ramos, became weary of outside agen-cies seeking to help them; because they feared having to take another loan. Barrowers could not possibly trust the bankers, since it had been so hard for the barrowers to work their way out of trouble yet it had been so easy for the banks to draw up the loans which got them into trouble from the beginning. Millions of others were forced to suffer parallel interruptions, errors and cons. These were people who thought they were doing everything right financially, but untimely got cheated by a lender scheme or just had bad luck and ended up losing their jobs and homes
During the time of the recession and for years before, the government was very tolerant of these unsavory tactics used by lenders, but since they drove up profits there was not much complaining coming out of them. All these practices of course went unchecked, until eventually all this deregulation led us into a great recession and pushed Ramos and many more like her into a tent. However, and even after millions were in need, the federal government could not come to an agreement over how or even whether the should help these so called irresponsible homeown-ers. The federal government’s efforts were unprecedented, as they were ineffective. It wasn’t until the banks had admitted to widespread law-breaking, that the government stepped in, ulti-mately just bailing out the people who were largely responsible for causing the crisis. Sheila Ra-mos story was that of many in this country, it was story of loss and pain; it was the American foreclosure story.
Jennifer Butz, of Atlanta G.A, was another person who had their life turned around when the crisis occurred. Just as the housing bubble made its last profitable year 2006, Butz had gotten a job as a home loan officer. Tragically, not long after that Butz was diagnosed with a blood dis-order which brought about many unforeseen medical expenses. Buttz stayed afloat for a couple years thanks to some savings and her few remaining credit cards. However, everything would change in 2008 when Butz became hospitalized for 38 days, and by the time she got out, she found that she had no job, her home was going into foreclosure, and her was repossessed. Buttz quickly found herself dealing with collection agencies since she hadn’t paid her credit cards. Adding more stress war her ever growing unpayable medical bills, she was left with no choice but to file for bankruptcy. Luckily however, Buttz received aid from a Catholic charity who helped pay for the surgery she desperately needed to remove her spleen. Buttz had to work for several years after her surgery to pay off the $6,000 on her car loan and $3,000 shed racked up in in credit card debt. Like countless Americans, Jennifer Buttz faced unforeseen health complica-tions, and was left wondering if she would ever get out of debt alive. Thankfully Jennifer Butz had the help of a charity, many Americans however were not so fortunate and lost everything, even their lives.
Finally, there was the story of Karla Sutton and her father David, who would come to lose his job at 54. Before 2007 David Sutton had purchased a new home in Columbus, Ohio and had half a million dollars in his retirement fund. However, after losing his job of 30 years with only a couple years till retirement age, Sutton was left in a very peculiar situation. Sutton howev-er was not going to take his unemployment sitting down, he would research and apply for posi-tions daily according to his daughter Karla Sutton “he was interviewed multiple times but never hired” recalled David’s daughter Karla Sutton believing that “being so close to retirement age many companies did not want to hire David, ad he eventually just gave up trying to find a job.” According to his daughter, David began to put on weight and he even developed hypertension. David Sutton went from having half a million dollars in his savings to having only thirty thou-sand by 2010. He then began to rack up massive credit card debt, and like Buttz and countless other was faced with a large medical bill and had no health insurance. David Suttons house, which he bought at the height of the bubble, lost but all its value.
For people of David’s generation, owning a home and having a job weren’t things they did or had, it became who they were. “Older Americans were less likely to become unemployed during the recession, but once they were, they looked for work longer, and fell out of the work more often than their younger counterparts”. “In 2010 an AARP survey of Americans ages 50 and older found that more than a quarter of people over that age had exhausted their savings, and had fallen behind on credit card payments and/or accumulated more credit card debt.” In this recession many Americans worse fears were realized when all their money disappeared at a blink of an eye. Sadly David Suttons story had a tragic ending, he collapsed one day after count-less pleads from his daughter that he see a specialist about his worsening physical condition. Be-cause David no longer had any life insurance, his daughter Karla Sutton ended up paying for her father’s funeral. The recession had literary broken people’s hearts and their wills as well.
One last story of bad economic timing and loss during the recession was that of Jewel Brown a 41-year-old woman from Georgia. Browns story began back in 2008 when she decided opened her own hair salon in Norcross, Georgia. However, within a year and because of an ongo-ing recession, Brown had begun doing gimmicks and running discounts just to get customers in-side her business. Because of a lack of money Brown was unable to hire more staff to increase productivity, so she bore the work herself. Browns home value became less than the mortgage she had on the house itself. Brown could not refinance, and found herself in the same position many Americans did during this time, stuck and with no one there to bail them out.
To stop the hemorrhaging, Brown began to cut back on all her expenses. Brown did what many others did during this time and cut the non-essential expenses out of her life, such as, eat-ing out, premium cable, and having a land line. However, living without electricity was not an option, so it didn’t take brown long to go through her six-month savings cushion. Brown and her son tried everything they could to save everywhere they could, they even developed new saving strategies. Brown got a break in 2010 when her interest rates were cut more than half, however, even the vest of news couldn’t help these people out of the economic hole which the crisis had put them in. Browns story as well as the Suttons and the Ramos, were common tales during this time. Stories of foreclosure and heartbreak, of so little gain and so much loss. It was a tremulous time for so many families in the United States, a time from which many of the people affected never recovered.
The 2008 financial crisis did not have its shortage of heartbreaking stories, it was ulti-mately an example of what will happen when the economic sector of a country goes unchecked for as many years as it did. The crisis forced America to look at what and who they really valued in their society. While decisions such as the expansion of the subprime mortgage market back in 1999, were probably made with good intentions, they were most likely the catalyst for many of the abuses which occurred during the great recession. When looking back it was clear to see that these people who had no business borrowing, were misled by the same lenders into borrowing amounts at ridiculous interest rates. Because of this many experts have speculated that if there would have been more oversight then maybe the financial turmoil of 2008 would not have been as unforeseeable and may have never even occured.
The consensus amongst economist became that the Great Recession ended in the middle of 2009; although arguably its effects could still be felt well after. In the United States the un-employment rate went as high as 10 percent in October of 2009, however through government regulation it was brought back down to around 7 percent in the years following. Consumer spending in 2010 was some of the highest recorded spending, since 2008. However, even after all these recovery strategies and legislature were put in order, unemployment remained one of the biggest issues in the country. The number of Americans who remained underemployed the fol-lowing years did not seem to be coming down as much as predicted in earlier years like 2012. Even years after the crisis, many Americans still had a high distrust of the banks, and the majori-ty remained careful about borrowing money.
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