The Morning Journal (Lorain, OH)
Ten years later, U.S. economy on a roll
EDITOR’S NOTE: This is the second of a two-part series looking at the Great Recession which started 10 years ago this fall and the recovery since then.
Time has been the great healer of wounds sustained by the U.S. and world economies since September 2008 and the onset of the Great Recession.
On September 12, 2018, the Dow Jones Industrial Average finished at 25,998.62. That was within shouting distance of its alltime high of 26,616.71 established on Jan. 26, 2018, and light years ahead of the Great Recession low of 6,507.04 from March 5, 2009.
The sustained upturn in U.S. economic fortunes was enabled in large measure by government intervention on an unprecedented scale. Measures taken to reverse the near-collapse of the economy included the Emergency Economic Stabilization Act of October 2008 and its Troubled Asset Relief Plan, or TARP.
TARP injected nearly $430 billion into the economy in the form of emergency loans to major financial institutions, manufacturers and other businesses whose survival was judged essential to keeping the economy afloat while maintaining employment for millions of Americans.
Also making major contributions to the climb back from the brink of an economic
meltdown were tens of millions of investors and portfolio managers who sustained heavy losses in the early days of the Great Recession but kept faith in the long-term viability of the stock market.
“There were lessons learned by business owners and policy-makers during that recession,” said Kirtland resident Jerry Cirino, an entrepreneur, investor and former business owner now serving as a Lake County commissioner.
“Positive things happened. Banks are more scrutinized and capitalized,” Cirino added. “We have a better understanding of Federal Reserve policy. There is more room for error. Mortgage lending is back to where it makes good business sense. Investors have more diversified holdings.”
Dale Vernon is a principal in AB Bernstein L.C.,
a New York City-based investment management and research firm. He believes there was gain from the pain of the Great Recession.
“There’s no question what happened to the economy in 2008 and 2009 affected the psyches of millions of people,” Vernon said. “But we’re smarter now, much better at playing the risk-reward game. We have a better understanding of balance sheets. We are asking a lot more questions and better questions.”
The steep economic downturn of 2008 and 2009 and near-term examinations of its causes also prompted Congress to pass legislation that added layers of regulations meant to shore up the viability of financial institutions, codify responsible business practices and protect consumers.
Chief among those legislative measures was the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Signed into law on July 21, 2010, Dodd-Frank provided for the creation of the Consumer Financial Protection Bureau. It also established rigorous guidelines for bailouts, capital and leverage requirements while toughened standards for the business practices of financial institutions.
“Within capitalism, because it is so successful and dwarfs any other economic system, there must be penalties for those who don’t act properly,” said Joseph P. Stanzi, managing directorsenior portfolio manager at McDonald Partners LLC of Cleveland.
However, Stanzi is convinced that with the economy again on solid ground, the time has come for Congress to re-examine some of the regulations put in place as a reaction to the events of 2008 and 2009.
“I’m a big believer in small government,” Stanzi said. “Sometimes it’s better for businesses to go under rather than having the government ride to the rescue. Business cycles represent natural movement between recession and recovery.”
Where is the economy headed in September 2018,
a decade removed from the traumatic early stages of the Great Recession?
“History tells us we will definitely have another recession at some point, but none of those numbers are flashing red right now,” Stanzi said.
Rick Meyers, senior managing director of the AB Bernstein regional office in Chicago, is optimistic with some concessions to reality.
“This year and next year, we’ll be OK,” Meyers said. “The debt bomb is a real issue, but it helps to have a much more nimble and active Federal Reserve.
”Because the modern cycle for expansion is longer and flatter than in the past, people looking for doubledigit returns on investments as we continue to recover from the crisis are going to be disappointed,” Meyers added. “But the basics of the economy are good and improving.”
“There were lessons learned by business owners and policymakers during that recession.”
— Kirtland resident Jerry Cirino, an entrepreneur, investor and former business owner now serving as a Lake County commissioner