2007 to 2009 Recession
The 2007 to 2009 Recession originated in the United States and turned into the worst financial crisis since the Great Depression
Other Names:
- Also referred to as the 2008-09 Great Recession
- Deepest downturn since the Great Depression of the 1930s
-
Shallowest recovery after since the 19302
2007 to 2009 Recession Trigger
- Started in 2007 with large loan losses from subprime mortgages
- Losses on subprime triggered closure of some hedge funds and money market funds
- Led to a state of fear and rush for liquidity - had to sell bonds, equities, etc. to meet margin calls
- 2008 failure of Bear Stearns, Lehman Brothers and AIG created more panic
- The Fed intervened by providing liquidity, but it was too late
- Crisis spread beyond US to Europe and Asia
Impacts From The 2007 to 2009 Recession
- Significant stock market panic/crash
- The DJIA fell almost 55% between 2007 and 2009
- Significant increase in unemployment (up ~10% from ~4.5%)
- Businesses implemented restructuring plans
- 6 Million jobs lost
- slashed inventory (10% / 150 Billion)
- unloaded facilities and assets at firesale prices
- 25%+ drop in home prices
- put those with little equity underwater
- resulted in many home foreclosures
- The Russell 2000 (RUT) lost all the gains it had made since the previous bear market low in 2002
- 60% drop
- Household equity values dropped by $6 Trillion
- Spread beyond the United States
- Dubai World bankruptcy (2009)
- European sovereign debt crisis
Long-Term Impacts
- Put psychological fear in investors mind - many didn't participate in forthcoming bull markets
- Much of the US populous lost faith in the financial system
Notable Bankruptcies & Near-Bankruptcies
- Lehman Brothers (bankrupt)
- Bear Stearns (bankrupt)
- Fannie Mae (bailout)
- Freddie Mac (bailout)
- American Insurance Group (AIG) bailout
Other names commonly used