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Ten years later: Wounds run deep from 2008 crash
Ten years have passed since the depths of the 2008 financial crisis and the U.S. has emerged as a more prosperous but less equal nation.
The bankruptcy of Lehman Brothers and government takeover of Fannie Mae and Freddie Mac in September 2008 set off a series of collapses that froze the global financial system and triggered a massive recession.
Millions of Americans would lose their homes to foreclosure and their jobs to the contracting economy. The devastation helped fuel the election of former President Obama, who enacted sweeping new rules for banks and a massive stimulus package over the opposition of Republicans.
A decade later, joblessness is close to all-time lows, corporations and banks are boasting record profits, and consumer spending has gradually risen as the economy expands. But the wounds still run deep for millions of Americans who haven't felt the full benefits of the recovery.
Inflation-adjusted wages have sunk despite the hot job market, rising housing costs have locked out many first-time homebuyers, and the working class has struggled to overcome the growing chasm between the richest and poorest Americans
Analysts say scores of new federal rules accomplished their goal of stabilizing the financial system, allowing the U.S. to rebuild after the crisis. Even so, there are growing concerns that the economy they helped create poses new, less familiar risks to American consumers.
"Did the rules make us safer or just different? I think it's just different," said Federal Financial Analytics managing partner Karen Petrou. "If you look at the financial system, it's considerably more fragile."
Topline economic numbers paint a picture of a booming economy. The unemployment rate of 3.9 percent is near the lowest level recorded in the modern U.S., and the economy has added jobs each month since October 2010.
Economic growth has accelerated to reach 4.2 percent of GDP in the second quarter of last year. Consumer optimism has reached the highest level in almost two decades.
Banks that were on the brink of failure ten years ago are now boasting record profits and have steadily chipped away at the Dodd-Frank Wall Street Reform law signed by Obama in 2010. The U.S. stock market also exploded in value as investors salivated over tax cuts and regulatory rollbacks enacted by President Trump and congressional Republicans.
Major U.S. banks fiercely protested Dodd-Frank's strict new lending restrictions, capital buffers and disclosures designed to prevent the risky practices that caused the crisis. But the industry has emerged stronger under the new regime. U.S. banks shattered earnings records in the second quarter of 2018, bringing in $60.2 billion in revenue with the help of the corporate tax cuts passed last year, according to federal data released last week.
Dozens of financial technology companies and non-bank mortgage lenders have also emerged in the decade since the crisis, seeking to serve communities unreached by banks. Non-bank lenders make up a growing share of the financial services industry, but lack the same oversight and routine inspections imposed on depository institutions.
"This is not your grandfather's banking system," said Richard Hunt, president and CEO of the Consumer Bankers Association, which represents retail banks in Washington. "It is a healthy, vibrant, tech-savvy industry that has no desire to go back to the days of yesterday."
Banks have regained the influence in Congress they lost a decade ago, and secured the enactment of a bipartisan rollback of Dodd-Frank in May geared toward loosening burdens on community banks and credit unions.
Republicans and Democrats have fought for years over the best ways to prevent another destabilizing financial crisis and protect consumers from risky and predatory loans. While several dozen Democrats teamed up with the GOP to pass the biggest rollback to Dodd-Frank, they received fierce criticism from a liberal coalition led by Sen. Elizabeth Warren (D-Mass.).
Democratic Sen. Catherine Cortez Masto served as Nevada attorney general from 2007 to 2015 when her state was one of the hardest hit by the foreclosure crisis. She told The Hill in an interview Wednesday that administration official and lawmakers are "willing to forget what happened in the past" at the risk of allowing more dangerous predatory lending.
"I can guarantee some of that is still playing out today," Cortez Masto said. "If we're not paying attention," she added, "it's going to happen again."
Anger toward the financial sector still grips much of the U.S. as workers still struggle to regain what they lost in the crisis. Wages and labor productivity growth have stayed largely stagnant despite low unemployment and record corporate profits, making it harder for workers to save and build wealth.
Low interest rates and easy money policies imposed by the Federal Reserve also helped fuel a massive rise in U.S. equity and property values, a boon for those wealthy enough to invest after the crisis. But that boost has also left much of the working class behind.
The housing market still highlights that divide.
Close to 8 million Americans lost their homes to foreclosure between 2007 and 2016, according to data from business intelligence firm CoreLogic, and high property values have prevented first-time and credit-troubled buyers from finding affordable homes.
"That has really far reaching equality effects when the most important source of wealth for lower for middle class families is a owning a home," Petrou said.
"If you look at average numbers, the economy is doing great," he added. "If you differentiate the economy by who's doing well, it stinks."