Great Recession in the United States

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The Great Recession in the United States was a severe economic downturn that lasted from December 2007 to June 2009. It was precipitated by the subprime mortgage crisis and the financial crisis of 2007–2008. The Great Recession was the most severe economic crisis in the United States since the Great Depression of the 1930s.

Causes

The primary causes of the Great Recession were the collapse of the housing bubble and the subsequent subprime mortgage crisis. The housing bubble was characterized by rapidly rising home prices, fueled by speculative investment and easy access to credit. When the bubble burst, home prices plummeted, leading to widespread mortgage defaults and foreclosures.

The subprime mortgage crisis was exacerbated by the proliferation of complex financial instruments such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). These instruments were widely held by financial institutions, and their collapse led to a severe liquidity crisis.

Impact

The Great Recession had a profound impact on the U.S. economy. Gross domestic product (GDP) contracted, and the unemployment rate soared to 10.0% in October 2009. The recession also led to significant declines in consumer spending and business investment.

The financial sector was particularly hard hit, with several major institutions, including Lehman Brothers, declaring bankruptcy. The crisis also led to the bailout of several large financial institutions through the Troubled Asset Relief Program (TARP).

Government Response

In response to the Great Recession, the U.S. government implemented several measures to stabilize the economy. The Federal Reserve lowered interest rates to near zero and implemented quantitative easing to increase liquidity. The American Recovery and Reinvestment Act of 2009 was enacted to stimulate economic growth through government spending and tax cuts.

Recovery

The recovery from the Great Recession was slow and uneven. While the economy began to grow again in the second half of 2009, the unemployment rate remained high for several years. The housing market also took several years to recover, with home prices not returning to pre-recession levels until the mid-2010s.

Legacy

The Great Recession had lasting effects on the U.S. economy and society. It led to increased scrutiny of financial institutions and the implementation of new regulations, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The crisis also had a significant impact on public attitudes towards debt and financial risk.

See also

• Subprime mortgage crisis
• Financial crisis of 2007–2008
• Great Depression
• American Recovery and Reinvestment Act of 2009
• Dodd-Frank Wall Street Reform and Consumer Protection Act
• Troubled Asset Relief Program