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Our Great Recession

"Our Great Recession" Continued...

Issue: "News of the Year," Dec. 27, 2008

Democratic opponents of the bill charged that it fell short of offering enough foreclosure relief.

Whatever the reasons for the opposition vote, the bill's defeat sent a chilling message to Wall Street. The Dow Jones industrial average fell more than 700 points in the few hours after the vote. Though legislators made enough tweaks in the bill, including the addition of $100 billion in pork, to push it through the House five days later, the damage was done. The market did not recover.

Fiscal conservatives decried such a massive expenditure and expansion of government, laying blame for the financial crisis on the misguided housing-for-all mandate of years past. A smoking gun quote from Rep. Barney Frank five years earlier lent credence to such accusations: "These two entities-Fannie Mae and Freddie Mac-are not facing any kind of financial crisis," the Massachusetts congressman told The New York Times in September 2003. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Of course, no amount of blame game could fix the problem at hand. Nor could the promise of a $700 billion market injection right the sinking economy. Investors grew only more squeamish over the fall, despite the federal dollars. The Dow Jones Industrial Average dipped to a six-year low of 7,552.29 on Nov. 20.

Increasingly desperate to halt the pain, the Federal Reserve unlocked $800 billion for mortgage, credit card, college, and auto lending, a move aimed at boosting the sagging availability of loans within the private sector. With a lame-duck Congress in session, legislators considered yet another bailout, this for the country's Big Three automakers, Ford, Chrysler, and General Motors.

But again, government action could not preclude the inevitable. This month, the National Bureau of Economic Research declared the country in recession and announced to all those living in denial for the past 12 months that, in fact, the recession had begun one year ago.

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