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8/2/2019 19.2 Trillion Dollars lost of Household Wealth in this recession in 2011 dollars---US Dept. of Treasurry April 13 2012--FinancialCrisisResponse in Charts
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The Financial Crisis ResponseIn ChartsApril 2012
8/2/2019 19.2 Trillion Dollars lost of Household Wealth in this recession in 2011 dollars---US Dept. of Treasurry April 13 2012--FinancialCrisisResponse in Charts
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8/2/2019 19.2 Trillion Dollars lost of Household Wealth in this recession in 2011 dollars---US Dept. of Treasurry April 13 2012--FinancialCrisisResponse in Charts
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This recession was the worst since the Great Depression
U.S. DEPARTMENT OF THE TREASURYSource: Bureau o Economic Analysis, Bureau o Labor Statistics, Federal Reserve Flow o Funds.
Real GDP, percent all rom pre-recession peak
-6%
-5%
-4%
-3%
-2%
-1%
0%
Pre-recession
peak
1 2
Years since pre-recession GDP peak
2007 - 09 recession
2001 recession
1990 - 91 recession1981 - 82 recession
1980 recession
1974 recession
= trough
1Metrics o the 07 - 09 fnancial crisis, peak-to-trough:
8.8 million jobs lost
$19.2 trillionlost household wealth(2011 dollars)
ChallengesRe ormCostResponse
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2007 2008 2009 2010 2011
+0.5%
+3.6%
+3.0%
+1.7%
-1.8%
+1.3%
-3.7%
-8.9%
-6.7%
-0.7%
+1.7%
+3.8% +3.9% +3.8%
+2.5%+2.3%
+0.4%+1.3%
+1.8%
+3.0%
ChallengesRe orm
The crisis response helped restart economic growth
U.S. DEPARTMENT OF THE TREASURYSource: Bureau o Economic Analysis.
2Real GDP growth, quarterly
Jan. 20, 2009 President Obama
takes o fce
Feb. 2009 Financial Stability Plan announced
Recovery Act signedHousing programs announced
Mar. 3, 2009 TALF program launched to help
revive credit markets Mar. 23, 2009 PPIP program announced to helprevive mortgage fnance market
May 7, 2009 Large bank stress test results released
Apr. 2, 2009 G-20 fnance ministers announcecoordinated response to globalfnancial crisis
Jun. 2009 First large banks repay TARP undsGM restructuring
Oct. 3, 2008 TARP fnancial stabilizationpackage enacted
CostResponse
Mar. 2008 Bear Stearns collapses
Sept. 2008 Fannie Mae and Freddie Mac conservatorship
Lehman Brothers bankruptcyAIG stabilization e ort
Jul. 7, 2008 FDIC intervenes
in IndyMac Bank
Dec. 12, 2007 Fed establishes frst liquidity
acility and currency swap lineswith other central banks
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2007 2008 2009 2010 2011
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
-
200
400
600
800
1,000
1,200
1,400
1,600
3 The crisis response paved the way or retirement savings to recover
U.S. DEPARTMENT OF THE TREASURYSource: Federal Reserve Flow o Funds.
S&P 500 index
Retirement fund assets(billions o 2011 dollars)
Jan. 20, 2009 President Obama
takes o fce
Feb. 2009
Financial Stability Plan announcedRecovery Act signedHousing programs announced
Mar. 3, 2009 TALF program launched to help revive credit markets
Mar. 23, 2009 PPIP program announced to help revive
mortgage fnance markets
May 7, 2009 Large bank stress test results released
Apr. 2, 2009 G-20 fnance ministers announcecoordinated response to globalfnancial crisis
Oct. 3, 2008 TARP fnancial stabilization package passed
Jun. 2009 First large banks repay TARP undsGM restructuring
Mar. 2008 Bear Stearns
collapses Sept. 2008
Fannie Mae/Freddie Mac conservatorshipLehman Brothers bankruptcy
AIG stabilization e ort
ChallengesRe ormCostResponse
Ch llRCR
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2006 2007 2008 2009 2010 2011
MoreMorebanksbanks
tighteningtightening
The crisis response helped unclog the credit pipes o the fnancial system
U.S. DEPARTMENT OF THE TREASURYSource: Federal Reserve Senior Loan O fcer Opinion Survey, Treasury calculations.
The crisis response helpedrestart the markets thatprovide fnancing or auto,credit card, mortgage, andbusiness loans.
For borrowers, it: Improved credit access Lowered borrowing
costs.
4
Net percentage o banks easing lending standards, by loan type
MoreMorebanksbankseasingeasing
-100
-80
-60
-40
-20
0
20
40
Commercial and industrial lending
Residential mortgages
Consumer credit cards
Jan. 20, 2009 President Obama
takes o fce
Feb. 2009 Financial Stability Plan announced
Recovery Act passedHousing programs announced
Mar. 3, 2009 TALF program launched
Mar. 23, 2009 PPIP program announced to helprevive mortgage fnance markets
May 7, 2009 Large bank stress test results released
Oct. 3, 2008 TARP enacted
Jun. 2009 First large banks repay TARP unds
ChallengesRe ormCostResponse
99%
99%
100%
Credit cards
Auto loans
Agency
mortgages
How much has the price of creditrecovered since the crisis?As measured by the return of yields of asset- backed securities to their pre-crisis levels
ChallengesRe ormC tR
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Financialmarkets
Smallbusinesses
Autos HousingRetirementConsumers
Helped supportcompanies thatneed credit to hireand grow.
Helped support acrucialmanufacturingindustry and saveAmerican jobs.
Helped restartcredit markets andstabilize firms thathold deposits andprovide credit.
Helped supportfamilies that needauto, credit card,and student loans.
Helped protectsavers with 401(k)plans, moneymarket funds, andother investments.
Helped supportAmericans seekingto obtain orrefinance amortgage, or
avoid foreclosure.
Small business
AutosFinancial marketsConsumersRetirementHousing
What did it support?
The crisis response helped support amilies and businesses
U.S. DEPARTMENT OF THE TREASURYSource: Treasury, O fce o Management and Budget.
5ChallengesRe ormCostResponse
The Treasury Department, the Federal Reserve, and other ederal agencies attacked the crisis on multiple ronts so that amiliestheir fnancial needs and businesses could obtain the credit they need to hire and grow.
This chart is intended to illustrate the breadth o the crisis response, but is not meant to be a complete depiction o all the actions taken by the government or th
ChallengesRe ormCostResponse
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The crisis response helped stabilize the housing market
U.S. DEPARTMENT OF THE TREASURYSource: Federal Reserve, HOPE NOW, Department o Housing and Urban Development.
6Conventional 30-year mortgage ratesThe governments
e orts helped keepmortgage rates low sothat Americans couldcontinue to buy homesand refnance in the wakeo the crisis.
Since April 2009, loanmodifcation programshave helped millions oborrowers stay in their
homes, more than thenumber who have losttheir homes to oreclosure.
Cumulative oreclosures and permanent modifcations started*
ChallengesRe ormCostResponse
* Cumulative HAMP permanent modifcations, FHA loss mitigation (such as modifcations, partial claims, and orbearance plans), and early delinquency interventions, plus proprietary modifcations completed as reportedNOW Alliance. Some homeowners may be counted in more than one category. Foreclosure completions are properties entering Real Estate Owned (REO) as reported by Realty Trac. This does not include other loss mitigunder Treasury housing programs or by the GSEs, such as orbearance plans, short sales, and second lien modifcations, which would increase the totals.
0
1
2
3
4
5
6
Apr '09 Jul '09 Oct '09 Jan '10 Apr '10 Jul '10 Oct '10 Jan '11 Apr '11 Jul '11 Oct '11 Jan '12
Privatemodifications
Since April 2009, there have been5 million permanent loan modifications
Foreclosurecompletions
2.6m
HAMP modifications
FHA loss mitigation
6 million
0
1
2
3
4
5
6
7
Jan '08 Jul '08 Jan '09 Jul '09 Jan '10 Jul '10 Jan '11 Jul '11 Jan '12
7 percent
ChallengesRe ormCostResponse
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2.2
2.3
2.4
2.5
Jan2009
'10 '11 '12
2.6m auto industry workers
+231,000auto jobs since
June 2009
The crisis response saved the auto industry and one million American jobs
U.S. DEPARTMENT OF THE TREASURYSource: Bureau o Labor Statistics, Autodata.
According toindependent estimates,the rescue o the autoindustry saved more thanone million American jobs.
Since the rescue, theauto industry has addedmore than 230,000 jobs.
The auto industryrescue is currentlyestimated to cost about$22 billion, but the costo a disorderly liquidationto amilies and businessesacross the country thatrely on the auto industrywould have been arhigher.
7Auto-industry employment
After June 2009 Post-restructuring o GM and Chrysler
Mar. 2009 President Obama rejects restructuring plans romGM and Chrysler, challenging them to developmore aggressive plans to return to viability.
Sales of motor vehicles in the U.S.
13m
10m12m
13m14.5m
2008 2009 2010 2011 2012(annualizedaverage to
date)
ChallengesRe ormCostResponse
ChallengesRe ormCostResponse
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The crisis response curbed the damage and helped restart the economy
U.S. DEPARTMENT OF THE TREASURYSource: Treasury analysis based on OECD and U.S. Census data.
8 Total civilian employment, percentage change rom pre-crisis peak Jobs are returning.
Despite the size o thefnancial shock, thespeed and orce o theresponse helped restore job growth more quicklythan in most otherrecent crises.
There is still morework ahead, butbusinesses have...
Added workers overthe last 25 straightmonths.
Created 4.1 million
jobs.
U.S.Great Depression
-30%
-20%
-10%
0%
+10%
+20%
Pre-crisispeak
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years since pre-crisis employment peak
U.S.2008-09
financial crisis
Average of 5 most recentadvanced economy financial crises
Spain 1974Norway 1986Finland 1989Sweden 1989Japan 1991
Jobs growth resumed much asterthan average o other recent fnancialcrises in advanced economies
ChallengesRe ormCostResponse
ChallengesRe ormCostResponse
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IMF March 2009 estimate of the cost
of U.S. response to 08-09 crisis
12.7% of GDP($1.9 trillion in 2011$)
Estimated total potential exposurefrom financial rescue
$24 trillionSpecial Inspector General for TARP, July 2009
U.S. pledges top
$7.7 trillionto ease frozen credit
Bloomberg November 24, 2008
How much were the fnancial stability programs expected to cost?
U.S. DEPARTMENT OF THE TREASURYSource: See Notes.
9Projections o potential cost o fnancial stability programs
Bank bailout could cost
$4 trillionCNNMoney.com
January 27, 2009
Fannie, Freddie bailoutcould cost taxpayers
$1 trillionThe Christian Science Monitor
June 18, 2010
Estimated cost of TARP
$356 billionCongressional Budget Office, March 2009
Estimated cost of TARP
$341 billionOffice of Management and Budget, August 2009
gp
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ChallengesRe ormCostResponse
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The projected cost o TARP has allen signifcantly
U.S. DEPARTMENT OF THE TREASURYSource: Treasury, O fce o Management and Budget.
The projected cost oTARP has allen signifcantlyover the last three years.
TARPs investment
programs, together withTreasurys additional stake inAIG, are currently expectedto realize a positive return
or taxpayers.
The remainingprojected cost is primarilyattributable to support orstruggling homeowners;these unds were notintended to be recovered.
TARP programs havereceived three straight cleanaudits.**
11Projections o TARP programs and additional Treasury AIG holdings, gain (cost)
-$341b
-$60b
-$291b
+$2b
-400
-350
-300
-250
-200
-150
-100
-50
0
50
Aug. 2009Mid-session Review
Feb. 2010President's Budget
Feb. 2011President's Budget
Feb. 2012President's Budget
Apr. 2012estimate
+$50 billion
-$400 billion loss
TARPoverall
Investment programs only(excludes housing)*
83%decrease in projected
TARP costs sinceAug. '09
POSITIVE RETURN
LOSS
* This represents the TARP investment programs and includes Treasurys additional AIG common stock holdings valued as o February29, 2012. It excludes oreclosure prevention unds, which were not intended to be recovered ($46B).** GAO annually reviews Treasury TARP cost estimates.
ChallengesRe ormCostResponse
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The bank investment program helped stabilize the fnancial system
Source: Treasury.
TARPs bankinvestment programshelped stabilize thefnancial system by
providing capital to morethan 700 banksthroughout the country.
More than 450 weresmall, community banks.
Treasury is continuingto wind down those
investments, which havealready realized asignifcant return ortaxpayers.
12Returns as o April 12, 2012
Federal Reserve regulatory minimum on stress tests
-
50
100
150
200
250
300
Oct'08
Apr'09
Oct'09
Apr'10
Oct'10
Apr'11
Oct'11
Apr'12
$300 billion
$245b
Repayments$230b
Realizedincome$34b
Disbursed Recovered
$264b
Outstanding bank program investments, principal
+$19bpositivereturn
Note: About $2b o the unds invested in banks refnanced into the SBLF program. This re ects less than 1% o the total TARP unds invested in banks.
A total o 348 banks remain in TARPs Capital Purchase Program and 82 banks remain in TARPs Community Development Capital Initiative
U.S. DEPARTMENT OF THE TREASURY
ChallengesRe ormCostResponse
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Max. commitmentMarch 2009
Remaining Investment Outstanding Value of Remaining Stake
76%of maximum committment
returned or cancelled to date
$44b
$182b
Current Value of RemainingGovernment Stake$49b
Interest/ Fees/GainsRealized to Date$12b
$61b
Based on current marketprices, the government is
expected to realize a gain onits AIG investment
Remaining investment outstandingAs of March 2012
Value of remaining stakeAs of March 2012
The crisis response helped prevent the collapse o the fnancial system and stabilized AI
U.S. DEPARTMENT OF THE TREASURYSource: Treasury, Federal Reserve.
13Total commitment (Treasury and Federal Reserve), outstanding investment, and value o ownership stake in AIG,
billions o dollars
ChallengesRe ormCostResponse
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The fnancial industry is less vulnerable to shocks than be ore the crisis
U.S. DEPARTMENT OF THE TREASURYSource: Federal Reserve orm Y-9C, Treasury calculations.
Banks have addednearly $400 billion in
resh capital as acushion against
unexpected losses andfnancial shocks.
Banks are also lessreliant on short-termunding, which can
disappear in a crisis and
leave them morevulnerable to panics.
14
Federal Reserve regulatory minimum on stress tests
Short-term wholesale unding as a percento assets, 4 largest U.S. banks
0
5
10
15
20
25
30
35
40
2002Q1
'03 '04 '05 '06 '07 '08 '09 '10 '11
40 percent
0
2
4
6
8
10
12
14
2002Q1
'03 '04 '05 '06 '07 '08 '09 '10 '11
Other Tier 1
Tier 1 Common
14 percent
Capital in bank holding companies as a percentage o risk-weighted assets
ChallengesRe ormCostResponse
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The U.S. banking system is proportionally smaller than that o other advanced economi
U.S. DEPARTMENT OF THE TREASURYSource: BankScope, IMF, Federal Reserve Flow o Funds.
15Total assets o commercial banks, percent o GDP
Total assets o 4 largest commercial banks, percent o GDP
Even with the
consolidation o some othe weakest players duringthe crisis, the UnitedStates has... the least concentrated
banking system o anymajor economy.
the smallest banking
system relative to thesize o its economy.
The new legal toolsestablished by the Dodd-Frank Act mean thatregulators will be betterable to dismantle andresolve large fnancial
institutions i necessary.
Belgium
Canada
France
GermanyItaly
Japan
Netherlands
Sweden
Switzerland
United Kingdom
United States
0%
100%
200%
300%
400%
500%
600%
0% 100% 200% 300% 400% 500% 600%
ChallengesRe ormCostResponse
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The economy still has ar to go to ully recover rom the fnancial crisis
U.S. DEPARTMENT OF THE TREASURYSource: Bureau o Labor Statistics, Congressional Budget O fce.
Unemployment rate, percent o the labor orce
Real output gap
Unemploymenthas allen, but it stillremains high.
Economic outputremains well below
its potential.
16
Long-term
unemploymentrate(27+ weeks)
0
24
6
8
10
12
Jan2006
'07 '08 '09 '10 '11 '12
12 percent
Unemploymentrate
Recessions
10
11
12
13
14
15
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
5.5%output gapin 2011Q4
$15 trillion
Real GDP(2005 dollars)
Real potential GDP(2005 dollars)
Recessions
ChallengesRe ormCostResponse
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The longstanding fnancial di fculties acing households persist
U.S. DEPARTMENT OF THE TREASURYSource: Federal Reserve Flow o Funds, U.S. Census.
Household debt, percent o disposable income
Household debt isdown relative to income,but a large overhang odebt remains.
Median householdincome has declinedover the last decade.
17
Real median household income
0
20
40
60
80
100
120
140
160
1980Q1
'85 '90 '95 '00 '05 '10
160 percent
Recessions
40,000
45,000
50,000
55,000
60,000
1967 '72 '77 '82 '87 '92 '97 '02 '07
1999: $53,252
$ 60,000
2010: $49,445
Recessions
ChallengesRe ormCostResponse
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The housing market remains a challenge
U.S. DEPARTMENT OF THE TREASURYSource: U.S. Census.
Inventory o vacant homes or sale only
New single- amily home sales
Inventories ounsold homes aredeclining, but slowly.The overhang rom thecrisis continues toweigh on prices.
New home salesare stabilizing, but the
housing marketremains weak.
18
0
0.4
0.8
1.2
1.6
Jan2003
'04 '05 '06 '07 '08 '09 '10 '11 '12
1.4 million Jul. 2005
313,000 Feb. 2012
1.6 million
Recessions
0
0.5
1.0
1.5
2.0
2.5
2004Q1
'05 '06 '07 '08 '09 '10 '11
2.5 millionRecessions
ChallengesRe ormCostResponse
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Tax Cuts-$3,000b
Other annualappropriations
-$1,700b
Iraq andAfghanistan-$1,400b
Other-$600b
MedicarePart D benefit
-$300b
December 2010tax deal-$250b
Recovery Act-$800b
Other-$410b
The ederal budget defcit must be reduced to begin paying down debt
U.S. DEPARTMENT OF THE TREASURYSource: Treasury analysis o Congressional Budget O fce data. See Notes or more details.
19
-8
-6
-4
-2
0
2
4
6
8
2001 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
$8 trillion
COSTS NOT DUETO LEGISLATION
(technical &economic)
Cost ofJanuary 2001 -January 2009
policies
Cost of post-January 2009policies
29%
59%
12%
In January 2001, CBO projectedcumulative surpluses wouldtotal $5.9 trillion through 2011.
CUMULATIVESURPLUS
CUMULATIVEDEFICIT
Instead,cumulative deficitshave totaled$6.0 trillion.
Post-January 2009Policies
-$1.4 trillionthrough 2011
Jan. 2001 - Jan. 2009Policies
-$7 trillionthrough 2011
Causes o the di erence between projected and actual cumulative budget surpluses/defcits, fscal years 2001 - 2011
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N
ChallengesRe ormCostResponse
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Notes
U.S. DEPARTMENT OF THE TREASURY
Nfnancial-stability/briefng-room/reports/105/Documents105/March%2012%20Report%20to%
20Congress.pd
Chart 13See the latest 105(a) report or urther details on TARPcost estimates: http://www.treasury.gov/initiatives/fnancial-stability/briefng-room/reports/105/Documents105/March%2012%20Report%20to%20Congress.pd
Chart 15Four largest U.S. banks by assets are JPMorgan Chase,Bank o America, Citigroup, and Wells Fargo.
Chart 19Based on data rom three annual Congressional
Budget O fce publications: theBudget and Economic Outlook, the update to the Outlook , and CBOsestimate o the Presidents Budget. Technical andeconomic actors include all changes in defcitprojections not due to the cost o new legislation,including updates to economic and demographicprojections. Post-January 2009 policies only re ectsthe e ect o policies, including temporary policies,through 2011. Does not re ect the defcit reductionproposed in the Presidents FY2013 Budget going
orward. Numbers may not sum due to rounding.