Financial Shock: A 360° Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis

13Economic Fallout

The subprime financial shock hit in summer 2007 and by early 2008 the U.S. economy had come unhinged. Economists and policymakers debated whether the nation was in recession, but for the majority of Americans, there was no debate. They were worth measurably less and their incomes didn’t stretch nearly as far.¹ For them this was a recession.

As summer 2008 approached, Americans’ anxiety regarding the economy and their own financial affairs was as high as it had been in more than a quarter century. Surveys of consumer sentiment concurred that the collective psyche had not been so fragile since the early 1980s, when inflation and unemployment were both in double digits.² Though both were still relatively low, it was telling that ...