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Edmund F. Biro still remembers how good his life was before the financial crisis that nearly destroyed the economy 10 years ago.
The software engineer was earning about $ 85,000 a year doing consulting work. He, his teenage fiancee and her husband lived in a three-bedroom Chatsworth condo that had jumped to about $ 500,000 in value. And, just in case of emergencies, he has a home equity line of credit.
"As far as I was concerned, things were going really well," he said, "except I was not aware of all the things that could go wrong."
There were a lot of them.
The housing market crashed. The economy fell into recession. Wall Street Investment Bank Lehman Bros. on Sep 15, 2008 – 10 years ago this week – plunged the nation into the worst financial crisis since the Great Depression.
Like many average Americans, Biro, now 61, is still struggling to get his life back in order.
He earns less than half what he did in 2007 after much of his work. His fiancee and her his left, he said, when he could not afford it. And yet he still has his condo, his value has dropped and he owes about $ 100,000 on the credit line.
"I'm very aware that I'm that unfortunate, and they're everywhere," he said.
Amid the chaos caused by Lehman's collapse, the big banks got billions of dollars in bailouts. Aggressive stimulus efforts by Washington officials injected trillions of dollars into the financial markets and the economy, triggering a bank stock market.
But there were no big bailouts for middle-income Americans.
About 8.7 million people lost their jobs, sending the unemployment rate soaring to 10%. Housing prices dropped by a third nation of their 2006 peak – and even more in California – as many as 10 million people to lose their homes.
By 2012, more than 1 in 7 Americans – a staggering 46.5 million people – were living below the poverty line.
The economy now has more than just the most important things in the world. But many of the deep wounds have yet to heal.
Median household income, adjusted for inflation, has fallen significantly in the last decade, while the incomes of the wealthiest have increased by 10%.
The crisis stunted US $ 70,000 each year
"While everyone is working on stabilizing and supporting the banks and Wall Street," said former California Treasurer Phil Angelides, "who chaired a national commission that studied the causes of the financial crisis.
The former recovery, which exacerbated a growing income gap that began in the 1970s, has had deep ramifications.
The anger caused by the bailouts and the failure of the Wall Street executives to jail for the cause of the spark sparked outrage on both ends of the political spectrum – helping propel Donald Trump's populist rise to the presidency.
The architects of the government's response to the crisis have been defeated in the past.
"We were focused on staving off disaster," said Henry M. Paulson Jr., Treasury Secretary Under President George W. Bush. "None of us can feel anything terrible about the suffering that is going on. I would just argue that this is related to the financial crisis. "
Bros., a storied Wall Street firm that Paulson and other federal officials had frantically tried to save.
It was a crisis that, in retrospect, had a healthy dose of old-fashioned greed.
The housing market is booming in the early 2000s, and it is likely to become more subdued.
Americans such as Celia de La Rosa, 65, discovered they were able to buy homes they never thought they could afford. After the value of her condo, $ 250,000 during the boom, De La Rosa sold for $ 610,000.
De La Rosa was earning only about $ 80,000 a year, making about $ 2,500 a month a stretch.
"I take full responsibility. I would not have signed it when I bought the house, but everyone said, 'Go ahead, buy the house,' "De La Rosa said.
"I had no reason to think that the housing market would crash. Everybody's houses were selling, "she said. "Then Wall Street started having all these problems and it all trickled down."
Banks and a new wave of subprime mortgages into complex financial securities, which are highly sensitive to the market.
To protect against a defaults on the securities, investors of another type of sophisticated product called a credit default swap. Trillions of dollars exchanged hands. An enormous financial house of cards has been constructed on a subprime loan.
When the housing bubble burst in 2006 and homes tumbled into foreclosure, the fallout spread like a virus. Countrywide Financial Corp. of Calabasas, IndyMac bank of Pasadena and other subprime lenders suffering huge losses and were sold collapsed starting in 2007.
Federal Reserve officials intervened in March 2008 to financially back the Wall Street investment bank Bear Stearns, which was on the verge of bankruptcy because it was laden with toxic mortgage assets. In early September 2008, federal regulators also seized
But Paulson, then Fed Chairman Ben S. Bernanke and Timothy F. Geithner, then-president of the Federal Reserve Bank of New York, drew the line at Lehman and allowed it to fail.
The stock market meltdown Paulson and Bernanke to warn congressional leaders that is necessary to prevent the collapse of the financial system. Congress passed the $ 700-billion Troubled Asset Relief Program shortly afterward.
The original goal was to purchase toxic mortgages from the banks. Goal Paulson decided quicker action was needed. He opted to inject money – nearly $ 250 billion – directly into hundreds of banks.
"We thought it was the best way to protect the American public," said Paulson, who said in a meeting with reporters that "this is a totally ineffective policy. for Wall Street. "
The bailouts defied a deeply held American principle: Those who get into trouble in the free market must suffer the consequences.
"When you violate such a core belief, people get mad," said Neel Kashkari, the Treasury's official Paulson tapped to run TARP and who is now president of the Federal Reserve Bank of Minneapolis. "I think we have the right things, but we're still paying the price."
Experts broadly agree that the bailouts worked to halt the financial crisis and stabilize the banking system. But that was only the first battle.
The crisis dramatically deepened the recession that started in December 2007, and that was a big blow to average if they had not bought a new house or refinanced an old one.
But with the worst of the crisis over the end of 2008, it became more politically difficult in Washington to provide additional taxpayer assistance.
One of the first moves by
Economists said the stimulus was vital to the economic recovery. But Robert Reich, a labor secretary under President Clinton, argues the legislation was a half-measure.
"I think it was not enough for average workers," said Reich, a UC Berkeley professor who wrote about income inequality in his 2015 book "Saving Capitalism . "
The day after Obama signed the stimulus bill, he tried to do more. He unveiled a $ 75-billion initiative – using TARP money – to help struggling homeowners get reduced mortgage payments by lowering their interest rates.
CNBC's Rick Santelli blasted the idea as a move to "subsidize the losers" mortgages "in an on-air 2009 rant that helped launch the
Economist Douglas Holtz-Eakin, a member of the Financial Crisis Inquiry Commission, who was a top advisor to the 2008 presidential campaign of Sen. John McCain (R-Ariz.), Said such a bailout for homeowners was not possible.
"There was no large-scale macroeconomic housing plan that was politically feasible," Hotlz-Eakin said, "It would have amounted to" a transfer of wealth to one of those people who were underwater from the others. "
The Obama administration pushed ahead with mortgage modification programs anyway, but they struggled to gain traction amidst bureaucratic problems at participating banks and consumer scams. In the end, the homeowners were less than half the promised $ 75 billion.
After the value of her Covina home dropped to $ 450,000 from the $ 610,000, the De La Rosa sought from one of the initiatives, the Home Affordable Refinance Program. An attorney asked for $ 3,000 to help with the application, then disappeared, she said.
De La Rosa was able to secure a change of interest rate of 7% for five years. It helped her stay in her home.
"It was very, very hard to swallow that I could not pay my bills and I was getting more and more in debt," she said. "It was not a fun time."
The bailout fund and stimulus legislation mostly tapped out congressional help, so the Fed tried to boost the economy with unprecedented and controversial steps.
Fed officials has their term of office in mind. And the Fed is about $ 4 trillion in mortgage-backed securities and Treasury bonds to push into quantitative easing.
The price of a large-scale, high-yield market, starting a record bull market that has seen the broad-based Standard & Poor's 500 index increase of about 125% from where it was just before the crisis.
"The Fed is not deliberately trying to sow the benefits to the top," said Adam Tooze,
The largest market in the United States is not enough in stocks, despite the availability of 401 (k) plans.
A Study of the Opportunity and Inclusive Growth Institute at the Federal Reserve Bank of Minneapolis, The Main Asset of the World 10% of earners is stocks.
Climbing home prices from 1950 to the mid-2000s with the help of the middle class. The collapse of the market and the financial crisis altered that, producing "the largest spike in wealth inequality in postwar American history," the study said.
Wage growth has also been stagnant for many people despite historically low unemployment. The median household income was $ 58,149 in 2007, according to the Census Bureau. In 2016, the most recent year available, it was $ 59,039 – just $ 890 more – after adjusting for inflation.
Anger over the growing income disparity, helped spark the Occupy Wall Street – the political left of the version of the tea party movement, which declared it to the other 99% of Americans.
"The tea party movement is angry with government for the sake of the bailout," Reich said. "They were two sides of the same corner. A lot of anger and distrust towards large institutions remains to this day. "
Biro, the Chatsworth software engineer, feels it.
He recalls how the bank representative did the paperwork for his right in his living room.
"I remember saying, 'Wow, that was easy,'" he recalled.
A decade after the crisis, Biro said that working people like him "did not get near the benefit" of the rescue that the banks and the wealthy did.
"I think the game has changed," he said, "and that's kind of scary."
Additional credits: Video edited by Robert Meeks. Animated graphics by Swetha Kannan. Produced by Justin L. Abrotsky.
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