no consensus on what—or who—is to blame for the current
economic crisis, but a boom in questionable
mortgages and refinancing didn't help. The domino effect that
followed was quick and brutal: Over-extended institutions froze lending as
foreclosures snowballed, while an economy built largely on credit skidded to a
near halt. Bankruptcies, job
losses, and depressed
spending then sent Wall Street on a downward spiral.
one—including former Federal Reserve Chairman Alan Greenspan—could have predicted the far-reaching effects on the global economy.
In February, the Treasury Department announced it would be disbursing stimulus
checks as part of its $168 billion plan to boost economic activity.
Taxpayers clamored to know if the check was actually in the mail, with many "when
will I get my tax rebate check" searches going out across the
Web. Not to fear if you haven't gotten one: More than 279,000
checks worth $163 million were returned as undeliverable because
of out-of-date addresses.
The stimulus provided only a short burst of spending, as the cost of consumer goods —and personal debt—soared. Gas hit a record
$4.11 per gallon in July in some parts of the U.S., prompting people to cut down on
driving. The consequences of consumers staying close to home then hit other
industries: Airlines started charging for checked
giants were forced to ask for government aid, and "staycation" entered the Search vernacular for the first time.
lining to the crumbling economy (aside from investors benefiting from gold prices)? Gas prices
that continue to tumble to new
Bail and Switch
On October 3, the government passed the unprecedented $700 billion rescue plan as Wall
Street giants like Merrill Lynch,
Brothers, and Bear Stearns
imploded. Critics of the taxpayer-funded plan voiced
concerns over whether free-wheeling financial institutions
like AIG deserved to be bailed out—and if the plan would actually work. Nor did news of CEO golden parachutes and spa
retreats help the nation's mood, as outraged searches
like "aig spa" reflected.
As it turned out, even the plan's architects had doubts: In November, Treasury
Paulson announced that a key part of the plan—buying banks' troubled
mortgage assets—would be dropped.
The wobbly financial system hit Wall Street hard. On October 27, the Dow Jones
Industrials slipped below 8,000.
Even the news of a national leadership change couldn't fight the stock market gloom; after an Election
Day rally, stocks slid for two days straight. The year 2008 has produced historic lows in the Dow's 112-year history.
The subprime mortgage crisis hit states like California, Nevada, and Florida the hardest. The city of Stockton, Calif., earned the dubious
distinction of the city with the highest number of foreclosures in the
country. On November 1, JPMorgan went as far as to freeze
new foreclosures for 90 days, but large-scale efforts to help homeowners
didn't begin until autumn.
The ripple effect has hit all levels. The usual refuge in hard times—education—became harder to access as lending institutions like Sallie Mae tightened up on credit.
With a new
president in the White House, Americans and financial leaders
around the world are watching for solutions to the crisis. Now that
we need" is here, the question in the year to come will be
whether those promises
will be—or can be— delivered. The world will be waiting...and searching.