The Obama administration pushed a $787 billion plan that created jobs. Economic growth finally turned positive by mid-year. Technically, the Great Recession was over. In reality, the damage was so deep that it took years before it felt like things were really getting better. For many who remained unemployed, lost their homes and credit rating, or were forced to take jobs at far lower pay, things only got worse. The timelines of the financial crisis of 2007 and the financial crisis of 2008 reveal how these events came to be and how their early warning signals were missed by the government. The American Recovery and Reinvestment Act extended unemployment benefits and suspension of taxes on those benefits through 2009. It provided $54 billion in tax write-offs for small businesses. It was the fiscal stimulus that ended the Great Recession. Feb. 18—Obama announced a $75 billion plan to help stop foreclosures. The Homeowner Affordability and Stability Plan was designed to help the 7 million to 9 million homeowners avoid foreclosure by restructuring or refinancing their mortgages before they got behind in their payments. Most banks wouldn’t allow a loan modification until the borrower missed three payments. HASP provided a $1,000-a-year principal payment for borrowers who stayed current on the loan. It was paid out of the Troubled Asset Relief Program funds. Feb. 27—The Bureau of Economic Analysis’s final report revised its U.S. gross domestic product growth rate for the fourth quarter of 2008 to a negative 6.3%. That was worse than the 3.8% drop it reported in its advance report. It was also the worst slowdown since Q1 1982 when GDP fell 6.1%. The recession caused demand to slump. Economic growth for all of 2008 was an anemic -0.1%. The Obama administration introduced HARP in April 2009. By 2016, the program had helped more than 3.3 million people. The fields of health care and education continued to expand. That often happens during a recession. Some people react to unemployment by getting sicker from the stress. Others return to school to get a new skill. The argument was that, if we had just let the banks go bankrupt, the worthless assets would have been written off. Other companies would have purchased the good assets and the economy would have been much stronger as a result. In other words, the government should have let capitalism do its thing. That’s what Former Treasury Secretary Hank Paulson attempted to do with Lehman Brothers. The result was a market panic. It created a run on the ultra-safe money market funds. That threatened to shut down cash flow to all businesses, large and small. In other words, the free market couldn’t solve the problem without government help. Banks needed the funds to write down their losses and avoid bankruptcy. Without the credit market functioning, businesses are not able to get the capital they need to run their day-to-day business. Without the bill, it would have been impossible for people to get credit applications approved for home mortgages and even car loans. In a few weeks, the lack of capital would have led to a shut-down of small businesses, which can’t afford the high-interest costs. Also, those whose mortgage rates reset would see their loan payments jump. This would have caused even more foreclosures. The Great Recession would have been a global depression. The bailout affected you by lowering interest rates, making it possible for the housing market to recover.
