Why did the US recover and manage the 2008 housing crisis better than the Great Depression? | 2022

Why American recovery from and management of the 2008 housing crisis was superior to that of the Great Depression

Overview

Despite the fact that the 2008-09 financial crisis has been over a decade, there are still many lessons to be gained from this particular economic downturn. To be sure, we have had an economic recovery, but it has been unequal, particularly for those on the lower end of the income scale with little to no investments or savings. Unfortunately, such people account for over half of all Americans, and while there may have been easy money to be gained because to ultra-low loan rates and other stimulants, far too many hardworking people were unable to take advantage of them.

The aftermath of the crisis resulted in reams of new legislation, the establishment of new oversight agencies that amounted to an alphabet soup of acronyms like TARP, 1 the FSOC, 2 and the CFPB 3 — most of which no longer exist—new committees and sub-committees, and platforms for politicians, whistleblowers, and executives to build their careers on, and enough books to fill a bookstore wall, many of which still exist.

As the COVID-19 epidemic threw the economy into a tailspin once more, the United States government and the Federal Reserve Bank looked back at the lessons acquired from the previous economic slump to see if they could help mitigate some of the severity.

In Numbers: The 2008-09 Financial Crisis
Let's start with some frightening figures before diving into the lessons—both learnt and unlearned—from the crisis:

8.8 million jobs were eliminated.
4 By October 2009, unemployment had risen to 10%.
5 to 8 million foreclosures
6 $19.2 trillion in household wealth has vanished 4 Home price decreases of 40% on average, with some areas experiencing much sharper drops.
In 2008, the S&P 500 fell 38.5%.
From 2008 to 2009, stock value fell $7.4 trillion, or $66,200 per household on average.
9 Employee-sponsored savings/retirement account balances fell by at least 25% in 2008.
10 By 2010, the delinquency rate for adjustable-rate mortgages (ARMs) had risen to around 30%.