A student of the Great Depression, Bernanke explained how such a collapse would affect the economy, from bankruptcy at firms like General Motors to soaring unemployment. The message for Congress was blunt: The Fed and Treasury could no longer prop up companies one by one. A more coordinated – and drastic – approach was needed. They needed a Congress-authorized rescue plan.
Eventually Congress did act, after an acrimonious debate, passing a rescue package that would allow the Treasury to inject billions into troubled firms. During these chaotic days, the full depth of the financial crisis began seeping out of the corridors of power in Washington and into the living rooms and corporate cubicles of America.
Today, five years later, the United States and other nations are still struggling with the task of recovering from the worst financial crisis since the 1930s – and formulating how to prevent a similar disaster from happening in the future.
The economy, despite massive revival efforts, is growing only tepidly – a problem due in part to lingering effects of the crisis. For example:
•One out of 5 mortgage borrowers today remains "under water," with loan balances larger than the home's market value.
•Unemployment in the US still hovers at a stubbornly high 7.4 percent – significantly higher at this stage than in any other economic recovery since World War II.
••Four years after the recession's official end, the Fed continues to hold short-term interest rates near zero percent in a bid to revive the economy – a remedy unprecedented in length and magnitude in Fed history.