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THE ECONOMIC FALLOUT
eastern states in the Midwest (Ohio, Indiana, Illinois, Wisconsin, and Michigan) had
the highest delinquency rate, topping in . By fall , this rate had risen to
.. Other regions also endured high rates—especially the so-called sand states,
where the housing crisis was the worst. The third quarter serious delinquency
rate for Florida was .; Nevada, .; Arizona, .; and California, ..
The data company CoreLogic identified the housing markets with the worst
records of “distressed” sales, which include short sales and sales of foreclosed proper-
ties. Las Vegas led the list in mid-, with distressed sales accounting for more
than of all home sales. “The state was overbuilt and some , jobs were
predicated on a level of growth and consumer spending that seemed to evaporate al-
most overnight,” Jeremy Aguero, an economic and marketing analyst who follows the
Nevada economy, testified to the Commission.
The performance of the stock market in the wake of the crisis also reduced
wealth. The Standard and Poor’s Index fell by a third in —the largest single-
year decline since —as big institutional investors moved to Treasury securities
and other investments that they perceived as safe. Individuals felt these effects not
only in their current budgets but also in their prospects for retirement. By one calcu-
lation, assets in retirement accounts such as (k)s lost . trillion, or about a third
of their value, between September and December . While the stock mar-
ket has recovered somewhat, the S&P as of December , , was still about
below where it was at the start of . Similarly, stock prices worldwide plum-
meted more than in but rebounded by in , according to the MSCI
World Index stock fund (which represents a collection of , global stocks).
The financial market fallout jeopardized some public pension plans—many of
which were already troubled before the crisis. In Colorado, state budget officials
warned that losses of billion, unaddressed, could cause the Public Employees Re-
tirement Association plan—which covers , public workers and teachers—to
go bust in two decades. The state cut retiree benefits to adjust for the losses. Mon-
tana’s public pension funds lost billion, or a fourth of their value, in the six months
following the downturn, in part because of investments in complex Wall Street
securities.
Even before the fall of , consumer confidence had been on a downward slope
for months. The Conference Board reported in May that its measure of con-
sumer confidence fell to the lowest point since late . By early , confidence
had plummeted to a new low; it has recovered somewhat since then but has remained
stubbornly bleak.
“[We find] nobody willing to make a decision. . . . nobody willing to take a
chance, because of the uncertainty in the economic environment, and that goes for
both the state and the federal level,” the commercial real estate developer and ap-
praiser Gregory Bynum testified at the FCIC’s Bakersfield hearing.
Influenced by the dramatic loss in wealth and by job insecurity, households have
cut back on debt. Total credit card debt expanded every year for two decades until it
peaked at billion at the end of . Almost two years later, that total had fallen
, to billion. The actions of banks have also played an important role: since
