Ark of the Lost Angels

The Ghosts of Fortunes Won and Lost _{(Credit: u/xkp1976 on Reddit)}

The 2008 Financial Crash and the Great Recession reshaped America in quiet but dramatic ways.

I have written before of being a Child of Two Shadows: the shadow of the grave of the Cold War and the shadow of the smoke at Ground Zero. I belong to a generation that was affected by a third shadow, which came roughly ten years later and charted the course for a massive realignment of society which took place without most people noticing the full extent of the changes which had occurred.

Any discussion of the modern historical eras seldom mentions the Financial Crash and Great Recession of 2008. The financial crash shaped culture both at the time and set the course for the decades to come. Nearly 20 years later, many of us are still dealing with the ramifications of such a blistering economic event.

2008 was a year of great change. Bush’s wars against terrorism were growing ever unpopular, the neoconservatism which had defined the 2000s was on its way out. During the presidential election which saw Barack Obama triumph over John McCain, and America entered a new era of hope for the future. The internet was beginning to consolidate people’s attentions around a few key sites, but there were still plenty of places beyond Facebook, Twitter, and YouTube where people resided on the internet.

The financial news chronicled a dramatically different series of circumstances, which would have severe consequences unforeseen by the average individual, but nevertheless, would bleed into popular culture.

The Financial Crisis

The background of the Financial Crisis came with the deregulation of the financial sector starting in the 1980s under Ronald Reagan. As Wall Street financial institutions grew bolder and bolder with how far outside the lines they were willing to play with no referees to keep watch, American financial power became increasingly focused on unstable markets. Real estate was one of them. Housing opportunities had exploded starting in the 1990s with tons of new construction. The price of housing exploded between 1990 and 2006, and due to the economic prosperity seen in the United States after the Cold War. With the American financial institutions free of previous regulations, they were able to make riskier moves which paid short term dividends. Scandals were commonplace because reporting was less rigid, leading to affairs such as Enron.

Enron was the most famous of the series of financial scandals which took place in the 1990s and early 2000s. The Enron scandal was a complex series of financial shell games, aggressive betting, and willful ignorance. In summary, Enron was an energy company which rose in the mid-80s that started selling energy as a commodity in the 1990s, becoming one of the biggest players in the market. Enron was seen as a rock solid investment because the company seemed unable to make a bad move.

The reason why is a little more complex. A brief summary will be provided here, but the book and documentary, “Enron: The Smartest Guys in the Room” covers it in much more depth. In essence, the company received the ability for ‘mark-to-market’ accounting, which allowed them to book projected future profits the moment they were projected. So the company’s stock price rose astronomically high because it was engaged in several ‘successful’ ventures which were booked as current profit even if the project had not even begun being implemented. When an endeavor failed, as many inevitably did, the previously projected profits remained on the book, and the stock price remained high. Creditors were more likely to loan Enron money because their financials looked so solid that every dime that was loaned practically promised dollars in return. Enron only existed in this form so long as nobody peeked behind the curtain. The scheme also included isolating bad assets and debts into smaller ventures under Enron but were legally separate enough so losses didn’t have to be reported on Enron’s books. This was only accomplished with the help of Arthur Andersen, one of the Big 5 accounting firms signing off on Enron’s cooked books. With the uncertainty of markets in the wake of the dotcom bubble burst, creditors started to become concerned about Enron’s profitability and the truth behind its books which seemed too good to be true. When the reality of Enron became apparent between 1999 and 2001, the stock price collapsed to devastatingly low levels at blisteringly fast speeds, and the company became the subject of a massive congressional investigation. Arthur Andersen’s reputation was so sullied by their role covering up Enron’s malpractice that they also collapsed in the wake of the scandal being made public.

A similar situation happened with the housing markets. Because the housing prices were so high, banks expanded who they were willing to offer home loans to from borrowers with high confidence of paying it back to those less likely to be able to pay off their homes. Banks started offering home loans to anyone and everyone who applied, as it afforded them a great amount of money in the short term. The problem really took hold when most homebuyers who truly couldn’t afford their homes thought, “Oh, well if the banks loaned me the money, it must mean I can afford it.” People then used their houses as collateral to make other major purchases, like vacation homes or boats and whatnot. The banks, seeing the poor rating of many of these loans, started bundling them together (mortgage-backed securities) and having the bundles appraised with much higher ratings as investments, meaning they were seen as safer investments. The deregulation in the 80s and 90s made it legal for banks to mix low-risk activities like commercial banking and insurance with high-risk activities like investment banking and propriety trading. The risky mortgage-backed securities were tied up in the investments which would affect other market sectors, and those subprime mortgages became the dynamite underneath he entire financial system.

The subprime mortgage holders began defaulting on their payments between 2004 and 2007, leading to the financial companies to investigate what all of these mortgage-backed securities were really about. The investment firms began maneuvering to get rid of the toxic assets before the mortgages were defaulted on, leading to the securities becoming worthless. This triggered the dominoes which sent the value of many of the cornerstone investments on Wall Street plummeting.  The end result was a collapse not only of two major investment banks in Bear Sterns and Lehman Brothers, but the rippling effects dealt a body blow to the American economy. Any financial institution which did business in the stock markets were affected, and it led to the biggest financial crash since the Great Depression.

The Day to Day

To the every day American, the 2008 financial crash was the first stage of a very devastating series of events which reshaped the country. The devastation of the economy meant companies had to lay off massive amounts of people to stay alive. Record numbers of Americans were unemployed. People lost their houses, and were forced to move. It reshaped the job market because positions which previously only needed a high school education were being sought by college graduates to keep food on the table. In concert with significant amount of offshoring, companies could ask for higher quality employees for the jobs which remained, and never bothered replacing the old type of entry level positions. A college degree became a necessity for many jobs which previously did not require them, and that meant the cost of college skyrocketed.

The housing shortage became worse, as real estate companies which had liquid capital after the financial crash were able to buy up scores of now foreclosed houses for cheap, turning entire neighborhoods into a series of rental properties. The centralization of control over housing has kept prices continually rising at a rate to continue being profitable for this collection of companies, and it keeps first time homebuyers low due to the high cost and low supply.

In the commercial world, the same thing happened. The companies which survived and had financial resources could buy up more and more. The 2008 financial crash led to the biggest consolidation of assets in the past 100 years in America. Monopolization of many industries became a major threat, and set the stage for today’s landscape where the same set of large conglomerates or private equity firms own the majority of companies in America. Without healthy competition or a genuine threat, these companies have become too big to fail.

Just like the financial companies during the crash itself. The phrase “too big to fail” means the companies are too big and vital to the economy to be allowed to fail. Therefore, the federal government has to cover these companies’ shortcomings. Their wins stay within the company, and their losses are passed along to the American taxpayer. The same problem has happened with the domestic aviation industry. In the 1990s, after the Cold War, the federal government sat down with the largest defense contractors and told them that they would be drawing down the defense budget and to avoid any of these companies going under (which would be bad optics so soon after the fall of the USSR), they would have to merge with each other. This means that Boeing cannot be allowed to suffer a large hit to its capabilities for poor quality control in their civilian airlines because their military products are too vital. Take that principal and apply it to dozens of financial firms who own investments in every sector of American life.

Every major industry was affected by the crash, with the federal government offering bailouts of everything from financial institutions to the automotive industry. Well-known and loved brands began disappearing due to somewhat shaky financial situations becoming death sentences. Car brands such as Pontiac and Saturn disappeared, while companies like Circuit City and Sharper Image who were on the decline were pushed over the edge. Airlines like Frontier were folded. The dire circumstances meant that a large number of companies which did not declare bankruptcy were still in such dire situations that they sold to the larger players in their market sectors, or merged. For example, United Airlines and Continental merged in 2010, and many smaller or more niche brands and companies either folded or were sold to the larger chains and had their identities stripped.

This unprecedented set of mergers drove costs up and the quality of service down for the average American. The federal bailouts of the industries after the crash cratered people’s trust in government. After 9/11, there was a sense that people needed to stand by the government to keep them safe from terrorism. The bailouts and capital injections with no oversight or guardrails in place meant companies used them to secure their own future success and not the wellbeing of their employees or the American people. Despite the hope that came with Obama’s election, an air of cynicism started to descend upon the population, which would manifest in different ways.

The Occupy Wall Street movement sparked up in 2011 as a response to the financial crash. Activists descended upon Zucotti Park in Lower Manhattan and swore to stay until there was a response to the lack of consequences for those who perpetrated the financial crisis. The lack of leadership in the movement itself led to the stated goals being as varied as a constitutional amendment banning money in politics, the arrest and prosecution of the financial institution executives, to the ouster of Congressmembers who had anything to do with any of the companies involved in any of it, and more. The rudderless movement squandered the energy of a group with a legitimate grievance, and the protest came to an end after two months when New York Police Department cleared the park and disbursed the protestors.

On the other side of the aisle, the Tea Party Movement grew out of conservatives’ genuine anger at the powers that be taking advantage of the average American. The movement was hijacked by conservative special interest groups and many of the moneyed interests the average voter and Tea Party supporter claimed to be against. The movement was subverted and came to reshape the Republican party from the fiscally and socially conservative, smart business party to a band of raving culture warriors wrapping themselves in the American flag, hiding their hatred behind the Bible, and actively rejecting science, logic, reason, and facts to service their own agendas. This would evolve further into the modern MAGA movement.

The end result is a political landscape which superficially rejected the conditions which led to the 2008 financial crash while truly worsening the conditions which led to it in the first place. Federal regulators have been defanged even further, not had their authority increased. Financial institutions are incentivized to prioritize short term gains over longer term stability. The age old saying, “the market can remain irrational longer than you [the individual] can remain solvent” rings truer today than ever before. The widespread financial fraud which perpetrated the worst financial crisis since the Great Depression has metastasized into Wall Street’s new standard operating procedure.

Another bubble is coming with the focus on AI development to the detriment of other areas of the economy. Companies have gone all in on the development of AI to the point where the money being spent on the underlying infrastructure and attempts to get the population to adopt AI on a wide basis is greater than the return on this investment. The market is now waiting for the first company to blink and admit it spent more than it could take in, and the others will fall like dominoes and the investments will deal another body blow to the economy. With weaker federal protections and a government more interested in abdicating responsibility towards the people across all three branches, the next wave will push America closer to a cyberpunk dystopia and away from the Great Society we were promised at the close of the 20^th century.

For the generation who grew up with the 2008 Crash and the Great Recession as the backdrop, it’s incredibly disheartening to see the adults learn nothing and set us up for the same situation that happened eighteen years ago.

The Children of the Recession

Being a child growing up with this as a backdrop, the political theory and larger implications behind it all were sadly over our heads. But it shaped our lives in massive ways. The job market, the education sphere, and the way society interacted were flipped over end and became the new normal by the time we made it to adulthood.

Gone were the days of renting a crappy apartment with scratchy industrial carpet and cheap faux-wood cabinets and playing video games with the money from a dead end retail job. Those who had ‘real’ jobs couldn’t afford to buy houses because the job market crashed and by the time many of them found gainful employment, the housing stock vanished. The crash of housing prices allowed those who still had money to swallow up now vacated houses as rental properties. The cost of owning and renting homes have risen dramatically in proportion to the average salary since the crash. Rent rates are through the roof for most Americans.

A generation was promised, with stories from parents and older siblings, a world of weekend mall trips, late night conversations at fast food joins with buzzing lightbulbs in the signs outside, frequent movie theater trips to kill time, and afternoons at skate parks. As shown in so many sitcoms aired on cable channels geared towards kids and teens, after school part-time jobs would give spending money and a sense of discipline to afford all of those other things. But by the time we came of age, we found a world which had been stripped of its color. The malls all put up policies banning anyone under eighteen from being present without an adult if they still existed at all. The part time jobs went to adults with college educations just looking to get by. The movie theaters jacked ticket prices up high and concessions even higher. The skate parks got bulldozed. All over the place, we were told that we were not welcome.

The third spaces across American society vanished as unprofitable. The malls vanished or enacted policies that kept us from congregating there. The story from our parents and older siblings of killing afternoons or evenings at the mall, with some window shopping, a food court dinner, and maybe a movie and some popcorn became utter fiction. The style of the businesses that remained became cold, unwelcoming, and austere. The message became clear: get whatever you came for and get out. The third space for the teenagers to socialize in person was gone. If it wasn’t making money at any given moment, it was useless to the powers that be. We were told that there was no place for us in the real world, and then got yelled at for spending too much time online, socializing through social media, forums, chatrooms, and video games.

The world of the children who grew up during the recession was marked by great change. Despite the economic devastation, the nature of the internet was changing rapidly thanks to the introduction and widespread adoption of the smartphones. The online world blurred with the real one. Discussions of epic Twitter fights and the craziest videos on YouTube became the normal lunchroom conversation fodder. As the world outside grew impossible to afford, or unappealing to live in, online was the safe haven.  

The crash and the recession also brought to an end the whimsical nature of design from the 1990s and 2000s. The futuristic aesthetic that became popularized around the turn of the millennium gave way for a dramatically more subdued, minimalistic, flatter, and less colorful design language in all aspects. The variety of car colors dropped dramatically and fun aesthetics in stores and fast food restaurants were replaced by simplistic neutral tone utilitarianism. The world became focused on flat, minimalistic, neutral tones. In many restaurant cases, this more universal design trend allowed fast food joins to open easier in a space vacated by a different brand. Should a Wendy’s fail, a McDonalds could open in its place without much renovation. Company logos stripped personality, the stores in the malls that did survive ripped out their brand identity in favor of bland assimilation.

These things never occurred to us while we were growing up. We were surrounded by culture affected by the massive tidal wave of the recession without understanding the full context around any of it. Even pop culture references went unnoticed to us who were too young to get them. For example, Call of Duty: Modern Warfare 2 was released in late 2009, and it quickly became one of the most beloved shooters of all time. The game’s first post-launch map pack being called the Stimulus Package in honor of the economic stimulus the US government offered to save the economy from completely falling off the cliff, and the map Bailout being included in that map pack as the government bailed out large businesses including financial firms and the auto industry. The irony of the location of Bailout being in the Washington DC suburbs was not lost on older players at the time. The reason for the map’s setting is because the campaign featured a fictional war between the United States and Russia and several missions took place during the battle of Washington DC, but it ended up as a bit of a satirical comparison with the political situation at the time. The idea of a brutal firefight with an invading foreign power inside an average apartment block named after the government’s failed economic policies is an apt metaphor for the situation America found itself in after the Great Recession.

I belong to a generation who grew up with depictions of average Americans working solid jobs without having to be highly educated or immensely qualified who could provide for their families. Now households on multiple incomes can barely make it by. A joke goes that polyamory is on the rise just because having three incomes as opposed to two makes it possible to pay bills in the modern age. That may not be too far from the truth. Culture was influenced in ways which now seem alien, especially to younger people who may not have lived through these events. Many people can place the War on Terror inspired plotlines, characters, and dramatic elements in fiction of its time, but the context surrounding the Great Recession seems to have been lost. The pro-business Republicanism and the need to stand by the government after 9/11 contributed to the financial crash in major ways, and the refusal of the federal government on all levels to restrict the banks led to the largest, quietest reshuffling of the national order in our nation’s history. From cultural all the way to economics, many of the problems faced in the new age of America were a direct result of the Great Recession and 2008 financial crash.