According to a study by the Dallas Federal Reserve, the
financial crisis of 2007-2009 “was associated with a huge loss of economic
output and financial wealth, psychological consequences and skill atrophy from
extended unemployment, an increase in government intervention, and other
significant costs.”[1]
The study’s abstract goes on to “conservatively estimate that 40 to 90 percent
of one year’s output ($6 trillion to $14 trillion, the equivalent of $50,000 to
$120,000 for every U.S. household) was foregone due to the 2007-09 [sic]
recession.”[2]
Interestingly, the Huffington Post “reports” the study’s finding in the
following terms: “a ‘conservative’
estimate of the damage is $14 trillion, or roughly one year’s U.S. gross
domestic product. This is based on how much output was lost during the crisis
and Great Recession, along with all the damage done to potential future
economic growth.”[3] In
fact, the article’s title claims that the crisis cost more than $14 trillion! Lest it be thought that the reporter and
editor suffer from a learning or reading disability, the gilding here is
notably in the direction of “selling more papers.”
Ironically, the Huffington
Post also published an article pointing to the lack of accountability in that “the
executives that [sic] were in charge of Bear’s headlong dive into the cesspool
of subprime mortgage lending hold similar jobs at the most powerful banks on
Wall Street: JPMorgan, Goldman Sachs, Bank of America and Deutsche Bank."[4]
The upshot is that those stakeholders who played a role in the
crisis, most significantly the people running the government, the media, and
the banks, have gone on, relatively unscathed, while the systemic risk remained
or has actually become even greater. As
a first step toward recovery, a systemic map depicting the interrelated parts in
the systemic failure and a related ethical analysis can provide a basis for reforms sufficient to
thwart another major financial crisis.
1.
Tyler Atkinson, David Luttrell, and Harvey Rosenblum, “How
Bad Was It? The Costs and Consequences of the 2007-09 Financial Crisis,”
Staff Paper No. 20, Federal Reserve Bank of Dallas, July 2013.
2. Ibid.
4.
Lauren Kyger and Alison Fitzgerald, “Former
Bear Stearns Executives Seemingly Unscathed by Financial Crisis They Helped
Trigger,” The Huffington Post, July 31, 2013. The article was originally
published by the Center for Public Integrity.