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BEFORE OUR VERY EYES 

Before the summer was over, Fannie Mae and Freddie Mac would be put into conser-
vatorship. Then, in September, Lehman Brothers failed and the remaining invest-
ment banks, Merrill Lynch, Goldman Sachs, and Morgan Stanley, struggled as they
lost the market’s confidence. AIG, with its massive credit default swap portfolio and
exposure to the subprime mortgage market, was rescued by the government. Finally,
many commercial banks and thrifts, which had their own exposures to declining
mortgage assets and their own exposures to short-term credit markets, teetered. In-
dyMac had already failed over the summer; in September, Washington Mutual be-
came the largest bank failure in U.S. history. In October, Wachovia struck a deal to be
acquired by Wells Fargo. Citigroup and Bank of America fought to stay afloat. Before
it was over, taxpayers had committed trillions of dollars through more than two
dozen extraordinary programs to stabilize the financial system and to prop up the na-
tion’s largest financial institutions.
The crisis that befell the country in  had been years in the making. In testi-
mony to the Commission, former Fed chairman Greenspan defended his record and
said most of his judgments had been correct. “I was right  of the time but I was
wrong  of the time,” he told the Commission.  Yet the consequences of what
went wrong in the run-up to the crisis would be enormous.
The economic impact of the crisis has been devastating. And the human devasta-
tion is continuing. The officially reported unemployment rate hovered at almost 
in November , but the underemployment rate, which includes those who have
given up looking for work and part-time workers who would prefer to be working
full-time, was above . And the share of unemployed workers who have been out
of work for more than six months was just above . Of large metropolitan areas,
Las Vegas, Nevada, and Riverside–San Bernardino, California, had the highest un-
employment—their rates were above .
The loans were as lethal as many had predicted, and it has been estimated that ul-
timately as many as  million households in the United States may lose their homes
to foreclosure. As of , foreclosure rates were highest in Florida and Nevada; in
Florida, nearly  of loans were in foreclosure, and Nevada was not very far
behind.  Nearly one-quarter of American mortgage borrowers owed more on their
mortgages than their home was worth. In Nevada, the percentage was nearly . 
Households have lost  trillion in wealth since .
As Mark Zandi, the chief economist of Moody’s Economy.com, testified to the
Commission, “The financial crisis has dealt a very serious blow to the U.S. economy.
The immediate impact was the Great Recession: the longest, broadest and most se-
vere downturn since the Great Depression of the s. . . . The longer-term fallout
from the economic crisis is also very substantial. . . . It will take years for employment
to regain its pre-crisis level.” 
Looking back on the years before the crisis, the economist Dean Baker said: “So
much of this was absolute public knowledge in the sense that we knew the number of
loans that were being issued with zero down. Now, do we suddenly think we have
that many more people—who are capable of taking on a loan with zero down who we