The Wall Street collapse in 2008 and the ensuing financial crisis has cost the nation an estimated $12.8 trillion, according to a study released Wednesday by Better Markets, a Washington advocacy group that lobbies for financial reform and tighter regulations on Wall Street.
The financial downturn’s huge price tag, which Better Markets attempts to calculate by adding the estimated $7.6 trillion in lost gross domestic product from 2008 to 2018 and the estimated $5.2 trillion in government bailouts and incentives, doesn’t even include the more-difficult-to-quantify damage to the nation’s psyche, Dennis Kelleher, the group’s president and CEO said.
“There’s a loss of belief in the American dream,” Mr. Kelleher told reporters in Washington, D.C. “That’s how bad things are.”
The study was released just days before the four-year anniversary of the 2008 collapse of Lehman Brothers, the Wall Street implosion that triggered the financial meltdown.
The $12.8 trillion figure, which the group calls a conservative estimate, attempts to quantify the costs of long-term unemployment, lost household wealth, foreclosures, government bailouts, emergency spending measures, and the other actions.
“The worst economy since the Great Depression touches every corner of our country, yet this is the first time anyone has tried to put a total value on the cost of the crisis and the implications of that cost for taxpayers, the country, and financial reform,” Mr. Kelleher said.
Some of the study’s findings:
• The average American family’s net worth fell by 40 percent in three years from 2007 to 2010. Household wealth declined to $55 trillion in January 2009, from $74 trillion in July 2007, erasing decades of gains.
• Home values declined to 2002 levels, which has forced 11 million homeowners into underwater mortgages, where they are paying more than the home is worth, which prevents many from selling. This destroyed 7 trillion in homeowner equity.
• Another 3.7 million to 5 million homes were foreclosured.
• The crisis led to 46.2 million Americans living in poverty as of 2010, the highest number in more than a half century. That means 9.3 million Americans lost their health insurance, and more than 46 million, or 15 percent, of Americans currently use food stamps, which is a 13 million increase from 2009.
While Wall Street complains that the Dodd-Frank regulations, which were enacted to prevent future such failures of the financial system, are too strict and unnecessary, Mr. Kelleher said focus should be turned to the destruction that the crisis caused.
“A key weapon Wall Street has used to kill, weaken or avoid financial regulation is to basically lie about the cost of financial reform while never mentioning the costs of the crises to the American people,” he said. “We hope that this report will change that debate by forcing everyone to also consider the enormous costs and pain inflicted by Wall Street throughout our entire country.”
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Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at firstname.lastname@example.org.
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