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U.S. Households Lost $100,000 From Crisis, Study Says

April 28 (Bloomberg) -- The financial crisis and recession cost U.S. households an average of about $100,000 in lost wealth and income, according to a study by former Treasury Department economist Phillip Swagel.

From June 2008 through March 2009, households’ stock holdings fell $66,000 and real estate dropped $30,000, according to the study released today by the Pew Economic Policy Group. Each household also lost an average $5,800 from unemployment and lower earnings from September 2008 through December 2009, the study said.

While stocks have rebounded this year, the fallout from the crisis was broader than the price of the government’s $700 billion bank rescue or $787 billion economic stimulus package, the study said. Swagel said the losses probably won’t be recouped until 2011 at the earliest.

“You want to avoid these crises,” he said in an interview. “Once you get into it, even if you do everything right, it’s still tremendously costly.”

The Pew study looks at how the financial crisis affected the overall U.S. economy, not just government spending on bailouts and rescues. It urges policy makers to consider the impact of a crisis when weighing preventive measures, in order to get a sense of the “potential value” those measures might bring.

In the five quarters ended December 2009, gross domestic product was $648 billion less than the Congressional Budget Office predicted. Swagel said that figure illustrates an economic toll beyond the cost of government efforts to arrest recession and restore financial stability.


“It’s like everyone just burned $5,800 as a result of the income and wage losses from the crisis,” said Swagel, a Georgetown University professor who was a Treasury assistant secretary in the Bush administration’s second term.

Obama administration efforts to overhaul U.S. financial regulation have faced opposition from Senate Republicans who say the proposal would create expensive bureaucracies and set the stage for future bailouts. Democrats and administration officials say the plan would be an improvement over the status quo.

“These reforms won’t satisfy everyone,” Treasury Secretary Timothy F. Geithner said yesterday in Milwaukee. “They won’t solve all our problems. But they will fix what caused this crisis, and they will make future crises less likely and less damaging.”

The Pew Financial Reform Project hasn’t taken a stand on the financial reform package before Congress. Director Gordon McDonald said its focus has been on a broader agenda to increase transparency and consumer protection while reducing the likelihood of another financial meltdown.

“We’re interested in seeing work on an early-warning system that can find and deal with signs of trouble,” he said.

To contact the reporter on this story: Rebecca Christie in Washington at;

To contact the editor responsible for this story: Christopher Wellisz at

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