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The Great Recession Timeline

The Great Recession in the 2000s was far from great. Here’s what you need to know about this dark time for the U.S. economy.

Written by Jess Ullrich / July 8, 2022

Quick Bites

  • The Great Recession was lengthy, lasting from 2007 to 2009; the recovery was similarly extensive.
  • While the U.S. housing bubble bursting played a big role, there was more to it than that.
  • The federal government bailed out banks to the tune of more than $650 billion.

While it might have "great" in its name, the Great Recession devastated the U.S. economy. (A more applicable moniker would be the "The Horrendous Recession.") From 2007 to 2009, market declines put a major strain on businesses leading to high unemployment, lower economic output and a huge—and majorly controversial—financial bailout.

Here’s what a recession is, what led up to the Great Recession and a concrete timeline of events.

Inside this article

  1. What's a recession?
  2. The Great Recession of 2008
  3. What caused the Great Recession?
  4. The timeline

What's a recession?

At the highest level, a recession is marked by persistent, declining economic output in a country or multiple countries. The result is that the affected nation's gross domestic product (GDP, the value of goods and services made in a country) declines over months, though on average for less than a year. You'll often see unemployment spikes, consumer spending decreases and production slowdowns during a recession.

What was the Great Recession of 2008?

The Great Recession was a period of economic decline in the United States during the 2000s. It officially lasted from December 2007 to June 2009, making it one of the longest economic declines since the 1930s.[1] During that time, the U.S. housing market declined precipitously, GDP dropped by 4.3%, and unemployment increased from around 5% in 2007 to 10% in 2009.[2]

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What caused the Great Recession?

You’ll often hear the Great Recession was caused by the housing bubble bursting. According to the Federal Reserve, the average cost of a home in the United States more than doubled from 1999 to 2006—one of the sharpest increases in history.[3] While soaring housing prices definitely played a role, there was more to it than that.

Lax regulations in the banking industry were a key factor and resulted in some shady lending practices.

“Just about anyone could buy a house with little or no money down,” says Warren Barnett, founder and president at Barnett & Company, a wealth management and financial planning company. Less-qualified and first-time buyers benefited from waived down payments and income requirements for mortgages.

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Basically, lenders were issuing loans to borrowers who would have typically been a serious credit risk, and interest-only and adjustable-rate mortgages were popular because monthly payments were lower to start.

If you’re wondering why banks were okay with lending to borrowers who couldn’t afford their mortgages, the answer is simple: money. Banks repackaged and sold their loans as mortgage-backed securities on the secondary market. They didn’t look as risky when bundled together. Large investment firms that purchased these assets then sold them as derivatives to eager investors seeking a profit.

The problem is the housing market rapidly declined as interest rates spiked and many borrowers could no longer afford to keep up with their payments (they went up alongside those adjustable-rate mortgages). The housing bubble eventually burst in 2007. This led to a significant devaluation of mortgage-backed securities, and the eventual collapse of major U.S. investment firms Bear Stearns and Lehman Brothers.

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In an attempt to avoid further economic catastrophe, the federal government committed about $635 billion in funds to faltering financial institutions through the Troubled Asset Relief Program (TARP).[4] While the government had bailed out banks in the past—the 1989 savings and loan bailout of around $160 billion is one example—a bailout of this size was unprecedented.[5]

“Even the two government-backed loan acquirers, Fannie and Freddie Mac, defaulted and were put into conservatorship where they exist to this day,” Barnett says. “Their stockholders and many others were wiped out.”

Gimme the timeline from start to finish!

1999-2006

  • Housing prices in the United States doubled.

  • Banks eased lending requirements for borrowers.

2006

  • The Fed increases interest rates.

  • Borrowers feel the pinch of higher mortgage payments.

2007

  • Banks start to fail and file for bankruptcy due to borrowers defaulting on their mortgages.

September 2007

  • The Fed cuts rates in an effort to get the U.S. economy back on course.

December 2007

  • Unfortunately, rate cuts weren’t enough. The U.S. economy experiences a downturn, GDP declines.

March 2008

  • Bear Stearns collapses and is acquired by JP Morgan Chase for just $2 per share—it had been trading at over $170 per share a few weeks earlier.[6]

  • Stock market tumbles.

September 2008

  • The U.S. government takes control of Fannie Mae and Freddie Mac.

  • Wall Street giant Lehman Brothers files for bankruptcy.

  • Federal Reserve bails out AIG with an $85 billion loan.[7]

  • Harry Paulson, U.S. Treasury Secretary, introduces the Troubled Asset Relief Program, which proposes using $700 billion of taxpayer money to bailout financial institutions and boost the economy.

  • Bank failures continue.

October 2008

  • Stock market tumbles, dropping over 20% in a week.

December 2008

  • The Fed slashes interest rates to nearly 0%.

December 2008-February 2009

  • Big bailouts continue. The U.S. government bails out Citigroup, Bank of America, General Motors and Chrysler.

February 2009

  • President Obama introduces a $787 billion stimulus plan and a $75 billion plan to help stop foreclosures.

March 2009

  • Stock market tumbles to multi-year low, declining over 50% from its high in October 2007.

June 2009

  • National Bureau of Economic Research declares the recession has ended. Despite this, the effects of the recession continue.

  • GM files for Chapter 11 bankruptcy.

October 2009

  • U.S. unemployment reaches 10%.

July 2010

  • ​​Dodd–Frank Wall Street Reform and Consumer Protection Act is introduced, with the goal of creating regulations to stave off future economic crises.

Article Sources
  1. “The Great Recession.” U.S. Federal Reserve. https://www.federalreservehistory.org/essays/great-recession-of-200709
  2. “Great Recession, Great Recovery? Trends from the Current Population Survey.” U.S. Bureau of Labor Statistics. April 2018. https://www.bls.gov/opub/mlr/2018/article/great-recession-great-recovery.htm
  3. “The Great Recession and Its Aftermath.” U.S. Federal Reserve. https://www.federalreservehistory.org/essays/great-recession-and-its-aftermath
  4. “Bailout Tracker.” ProPublica. https://projects.propublica.org/bailout/
  5. “Federal Assistance to Troubled Industries: Select Examples.” Congressional Research Service. March 19, 2020. https://crsreports.congress.gov/product/pdf/R/R46277
  6. “JPMorgan to Buy Bear Stearns for $2 a Share.” Reuters March 16, 2008. https://www.reuters.com/article/us-bearstearns/jpmorgan-to-buy-bear-stearns-for-2-a-share-idUSN1438968020080317
  7. “Fed’s 85 Billion Loan Rescues Insurer.” NY Times. Sept. 16, 2008. https://www.nytimes.com/2008/09/17/business/17insure.html

About the Author

Jess Ullrich

Jess Ullrich

Jess Ullrich is a personal finance writer who's been creating online content since 2009.

Full bio

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