8 of the Most Consequential Bear Markets in U.S. History (and What We Can Learn From Them)
The economic downturn of the late 2000s was the worst since the Great Depression. A congressional committee subsequently determined the cause was mainly a lack of regulation of the packaging and sale of mortgage-backed securities, firms taking on too much risk, and excessive consumer borrowing (specifically, people investing in toxic mortgages.)
Most people didn’t understood that when it was happening, of course, but the situation was so bad that the Feds had to extend nearly 8 trillion dollars in loans to financial institutions and drop interest rates to nearly zero.
What we can learn from the great recession: Remember back in 2007 when it felt like the sky was falling? Every bear market feels like that to the people living through it, especially one marked by high unemployment and a huge wave of home foreclosures. But the bad times pass, eventually; the stock market, which had lost half its value by 2009, recovered to new heights by 2013—and kept climbing.
As a country, the tumult theoretically taught us a hard lesson about the importance of regulating financial institutions. The Great Recession lead directly to the passage of the Dodd-Frank Act, the most comprehensive set of market reforms since the 1930s. (Too bad the lessons didn’t stick: Much of Dodd-Frank was repealed in 2018.)