Why This Recession Was Different

There have been several recessions over the last half-century, but none as bad as we've experienced over the last four years.

Why?

There are dozens of reasons, but the simplest and most powerful is that, after three decades of leveraging up, U.S. households took on too much debt, and the bill came due. The fact that Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) went from two of the most profitable companies in the world to the brink of bankruptcy in a matter of months shows how dramatic and fast that shift came.

But why did households go into so much debt to begin with? I recently sat down with Mesirow Financial chief economist Diane Swonk, who offered some interesting insights when I asked her why this recession was different than those in the past. Have a look:

What do you think? Share your thoughts below.

Fool contributor Morgan Housel owns B of A preferred. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Bank of America and Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1758011, ~/Articles/ArticleHandler.aspx, 10/21/2014 10:13:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement