🕷️ Crawler Inspector

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Direct Parameter Lookup

Raw Queries and Responses

1. Shard Calculation

Query:

Response:

Calculated Shard: 148 (from laksa030)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/terms/g/great-recession.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/terms/g/great-recession.asp\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp","crawl_time":1775795574,"first_indexed_time":1504635788,"http_code":200,"src_unparsed":"com,investopedia!www,\/terms\/g\/great-recession.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"Great Recession: What It Was and What Caused It","meta_descriptions":["Learn what the Great Recession was, the key factors that caused it, how it affected markets and jobs, and the lessons learned from the global financial crisis."],"attrs_boilerpipe_text":"Key Takeaways\nThe Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis.\nThe Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s.\nIn response to the Great Recession, unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some—but not all—credit with the subsequent recovery.\nWhat Was the Great Recession?\nThe Great Recession was the sharp decline in economic activity that started in 2007. The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives plummeted in value.\nUnderstanding the Great Recession\nThe term Great Recession is a play on the term Great Depression of the 1930s, when\ngross domestic product (GDP)\ndeclined more than 10%, and unemployment hit 25%.\nWhile no explicit criteria exist to differentiate a\ndepression\nfrom a severe recession, there is a near consensus among economists that the downturn of 2007 to 2009 was not a depression. During the Great Recession, U.S. GDP declined by 0.3% from 2008 to 2009, and unemployment briefly reached 10% in October 2009.\nImportant\nThe term Great Recession applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009.\nCauses of the Great Recession\nAccording to a 2011 Financial Crisis Inquiry Commission report, the Great Recession was avoidable. The appointees, who included six Democrats and four Republicans, cited several key contributing factors that they determined led to the downturn.\nThe report first identified the government's failure to regulate the financial industry. This included the\nFederal Reserve\n’s inability to stop banks from giving\nmortgages\nto people who proved to be bad credit risks.\nNext, too many financial firms took on excess risk. The\nshadow banking system\n, which included investment firms, grew to rival the depository banking system but was not under the same scrutiny or regulation. The collapse of this system impacted the credit flow to consumers and businesses.\nThe report also identified excessive borrowing by consumers and corporations, along with lawmakers who didn't fully understand the collapsing financial system. This created asset\nbubbles\n, especially in the housing market, as mortgages were extended at low interest rates to unqualified borrowers who couldn't repay them. The ensuing selloff caused housing prices to fall and left many other homeowners underwater. This severely impacted the market for the\nmortgage-backed securities (MBSs)\nthat banks and other institutional investors held.\nOrigins and Consequences of the Great Recession\nThe 2001 dot-com bubble implosion, followed by the terrorist attacks of Sept. 11, 2001, hammered the U.S. economy. The Fed responded by cutting interest rates to the lowest levels to stimulate the economy, holding them low through mid-2004.\nCombined with federal policy to encourage homeownership, low interest rates helped spark a boom in\nreal estate\nand financial markets and a dramatic expansion of the volume of total mortgage debt. Financial innovations, such as new types of\nsubprime\nand\nadjustable mortgages\n, allowed borrowers—many of whom otherwise might not have qualified—to obtain home loans on generous terms based on the expectation that interest rates would remain low and home prices would continue to rise.\nHowever, from 2004 through 2006, the Fed raised interest rates to control inflation.\nAs interest rates rose, the flow of new credit through traditional banking channels into real estate slowed. More seriously, rates on existing adjustable\nmortgages\nand exotic loans began to reset at much higher rates than many borrowers expected (or were led to expect by lenders). As monthly mortgage payments rose beyond borrowers’ ability to pay (and they could not simply refinance, as prices had stopped steadily rising), many borrowers started to sell. The increase in supply burst what was later widely recognized to be a\nhousing bubble\n.\nDuring the U.S. housing boom, financial institutions sold MBSs and complex\nderivative\nproducts at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value. The credit markets that financed the housing bubble quickly followed housing prices into a downturn as a\ncredit crisis\nbegan unfolding in 2007. The\nsolvency\nof over-leveraged banks and financial institutions hit a breaking point when\nBear Stearns\ncollapsed in March 2008.\nThings came to a head later that year with\nLehman Brothers'\nbankruptcy, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread globally, most notably in Europe.\nAs a result of the Great Recession, the U.S. alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics. This doubled the unemployment rate.\nAmerican households lost roughly $18 trillion in\nnet worth\nas the stock market plunged.\nThe Great Recession officially ended in June 2009.\nImportant\nThe 2010 Dodd-Frank Act gave the government control of failing financial institutions and the ability to establish consumer protections against predatory lending.\nResponse to the Great Recession\nThe aggressive monetary policies that the Fed took, along with other central banks around the world, were widely credited with preventing even greater damage to the global economy. However, some also criticized the moves, claiming they made the recession last longer and laid the groundwork for later recessions.\nMonetary and Fiscal Policy\nThe Fed lowered a key interest rate to nearly zero to promote\nliquidity\n. In an unprecedented move, it also provided banks with trillions of emergency loans in a policy known as\nquantitative easing (QE)\n.\nSome estimates have the figures at a low $1.2 trillion, others at $7.7 trillion, and the highest estimate is $29 trillion.\nAlong with increasing liquidity, the U.S. federal government stimulated the economy by spending $787 billion under the\nAmerican Recovery and Reinvestment Act (ARRA)\n. This figure was later raised to $831 billion.\nThese monetary and fiscal policies reduced immediate losses to major financial institutions and large corporations.\nThe Dodd-Frank Act\nNot only did the government introduce stimulus packages, but it also established new financial regulation. In the 1990s, the U.S. repealed the\nGlass-Steagall Act\n, a Depression-era regulation that separated investment from retail banking to reduce systemic risk. Some economists say this helped cause the crisis. The repeal allowed some large U.S. banks to merge and form larger institutions, many of which later failed and had to be\nbailed out\n.\nIn response, in 2010, the U.S. Congress passed, and then-President Barack Obama signed, the\nDodd-Frank Act\n. This gave the government expanded power to regulate the financial sector, including greater control over financial institutions that were close to failing. It also created consumer protections against predatory lending.\nHowever, critics of the Dodd-Frank Act note that the financial sector players and institutions that actively drove and profited from predatory lending and related practices during the housing and financial bubbles were also deeply involved in both the drafting of the new law and in the agencies charged with its implementation. \nFast Fact\nThe U.S. federal government spent $831 billion (originally $787 billion) to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act.\nRecovery From the Great Recession\nFollowing these policies, the economy gradually recovered.\nReal GDP\nbottomed out in the second quarter of 2009 and regained its pre-recession peak in the third quarter of 2010, about two and a half years after the initial onset of the official recession.\nFinancial markets recovered as the flood of liquidity washed over Wall Street.\nThe\nDow Jones Industrial Average (DJIA)\n, which lost over half its value from its August 2007 peak, began to recover in March 2009 and broke its 2007 high in March 2013.\nFor workers and households, the picture was less rosy. Unemployment was at 5% at the end of 2007, reached a high of 10% in October 2009, and did not recover to 5% until 2015, nearly eight years after the beginning of the recession.\nReal median household income didn't recover to pre-recession levels until 2016.\nCritics of the policy response and how it shaped the recovery argue that the tidal wave of liquidity and deficit spending propped up politically connected financial institutions and big business at the expense of ordinary people. It also may have delayed recovery by tying up economic resources in industries and activities that deserved to fail, when those assets and resources could have been used by other businesses to expand and create jobs.\nHow Long Did the Great Recession Last?\nAccording to official Federal Reserve data, the Great Recession lasted 18 months, from December 2007 through June 2009.\nHave There Been Recessions Since the Great Recession?\nYes, there was a recession from February 2020 to April 2020. It was the shortest recession on record.\nHow Much Did the Stock Market Crash During the Great Recession?\nOn Oct. 9, 2007, the Dow Jones closed at its pre-recession high of 14,164.53. By March 5, 2009, the index had fallen more than 50% to 6,594.44.\nOn Sept. 29, 2008, the Dow fell nearly 778 points in one day. It was the largest point drop in history until the market crashed in March 2020 during the COVID-19 pandemic.\nThe Bottom Line\nThe Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive\nmortgage lending\nto borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors.\nLow interest rates and poor regulatory oversight following the repeal of the Glass-Steagall Act compounded the problem, as credit was cheap and lending institutions had been freed from regulations that would have hampered their ability to mix commercial and investment banking, which Glass-Steagall had separated.\nAs the economy imploded and financial institutions failed, the U.S. government launched a massive bailout program, which included assistance for consumers and the many unemployed people via the $787 billion American Recovery and Reinvestment Act (ARRA). (It was later increased to $831 billion.) Most credit the bailouts and the ARRA with providing much-needed relief to the public and with saving the financial industry (along with other industries) from total failure. However, some assert the money used to bail out insolvent institutions could have been directed to more productive enterprises rather than using it to save failed ones.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Trade](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - 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Blame the Stock Market](https:\/\/www.investopedia.com\/why-is-inflation-so-stubbornly-high-blame-the-stock-market-11944367)\n\nTable of Contents\n\nExpand\n\nTable of Contents\n\n- [What Was the Great Recession?](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-what-was-the-great-recession)\n- [Understanding the Great Recession](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-understanding-the-great-recession)\n- [Causes](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-causes-of-the-great-recession)\n- [Origins and Consequences](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-origins-and-consequences-of-the-great-recession)\n- [Response](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-response-to-the-great-recession)\n- [Recovery](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-recovery-from-the-great-recession)\n- [FAQs](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-how-long-did-the-great-recession-last)\n- [The Bottom Line](https:\/\/www.investopedia.com\/terms\/g\/great-recession.asp#toc-the-bottom-line)\n\n# Great Recession: What It Was and What Caused It\nBy\n\n[The Investopedia Team](https:\/\/www.investopedia.com\/contributors\/0\/)\n\n![Investopedia logo ]()\n\n![Investopedia logo ](https:\/\/www.investopedia.com\/thmb\/KwYTCWLo2xihE5JwkFJcd48EzyQ=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/Group1805-3b9f749674f0434184ef75020339bd35.jpg)\n\n[Full Bio](https:\/\/www.investopedia.com\/contributors\/0\/)\n\nInvestopedia contributors come from a range of backgrounds, and over 25 years there have been thousands of expert writers and editors who have contributed.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\nUpdated December 23, 2025\n\nReviewed by\n\n[Michael J Boyle](https:\/\/www.investopedia.com\/michael-j-boyle-4799785)\n\n![Michael Boyle]()\n\n![Michael Boyle](https:\/\/www.investopedia.com\/thmb\/Ds39WPMbYISxbsTYRr8lNF5xP80=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/image0-MichaelBoyle-d90f2cc61d274246a2be03cdd144f699.jpeg)\n\nReviewed by Michael J Boyle\n\n[Full Bio](https:\/\/www.investopedia.com\/michael-j-boyle-4799785)\n\nMichael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.\n\nLearn about our  [Financial Review Board](https:\/\/www.investopedia.com\/investopedia-financial-review-board-5076269)\n\nFact checked by\n\n[Vikki Velasquez](https:\/\/www.investopedia.com\/vikki-velasquez-5198872)\n\n![Vikkie Velasquez]()\n\n![Vikkie Velasquez](https:\/\/www.investopedia.com\/thmb\/qsiqwN4603qvBBcEmwBBFAZ7h-8=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg)\n\nFact checked by Vikki Velasquez\n\n[Full Bio](https:\/\/www.investopedia.com\/vikki-velasquez-5198872)\n\nVikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\n![The Great Recession](https:\/\/www.investopedia.com\/thmb\/1ct4l03zPw_-STbF8BREGkgBt5w=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/great-recession_sourcefile-1-26478e8a0b5e48ce9df18f92cc991a7e.jpg)\n\n![The Great Recession](https:\/\/www.investopedia.com\/thmb\/1ct4l03zPw_-STbF8BREGkgBt5w=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/great-recession_sourcefile-1-26478e8a0b5e48ce9df18f92cc991a7e.jpg)\n\nThe Great Recession saw a decline of the housing market and employment, and also hurt household incomes and retirement savings.\n\nNoNo Flores \/ Investopedia\n\nClose\n\nDefinition\n\nThe Great Recession was a severe and global economic downturn from 2007 to 2009 that was triggered primarily by the collapse of the U.S. housing market and the resulting financial crisis.\n\n### Key Takeaways\n- The Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis.\n- The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s.\n- In response to the Great Recession, unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some—but not all—credit with the subsequent recovery.\n## What Was the Great Recession?\nThe Great Recession was the sharp decline in economic activity that started in 2007. The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives plummeted in value.\n\n## Understanding the Great Recession\nThe term Great Recession is a play on the term Great Depression of the 1930s, when [gross domestic product (GDP)](https:\/\/www.investopedia.com\/terms\/g\/gdp.asp) declined more than 10%, and unemployment hit 25%.\n\nWhile no explicit criteria exist to differentiate a [depression](https:\/\/www.investopedia.com\/terms\/d\/depression.asp) from a severe recession, there is a near consensus among economists that the downturn of 2007 to 2009 was not a depression. During the Great Recession, U.S. GDP declined by 0.3% from 2008 to 2009, and unemployment briefly reached 10% in October 2009.\n\n### Important\nThe term Great Recession applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009.\n## Causes of the Great Recession\nAccording to a 2011 Financial Crisis Inquiry Commission report, the Great Recession was avoidable. The appointees, who included six Democrats and four Republicans, cited several key contributing factors that they determined led to the downturn.\n\nThe report first identified the government's failure to regulate the financial industry. This included the [Federal Reserve](https:\/\/www.investopedia.com\/terms\/f\/federalreservebank.asp)’s inability to stop banks from giving [mortgages](https:\/\/www.investopedia.com\/the-best-mortgage-lenders-11714101) to people who proved to be bad credit risks.\n\nNext, too many financial firms took on excess risk. The [shadow banking system](https:\/\/www.investopedia.com\/terms\/s\/shadow-banking-system.asp), which included investment firms, grew to rival the depository banking system but was not under the same scrutiny or regulation. The collapse of this system impacted the credit flow to consumers and businesses.\n\nThe report also identified excessive borrowing by consumers and corporations, along with lawmakers who didn't fully understand the collapsing financial system. This created asset [bubbles](https:\/\/www.investopedia.com\/terms\/b\/bubble.asp), especially in the housing market, as mortgages were extended at low interest rates to unqualified borrowers who couldn't repay them. The ensuing selloff caused housing prices to fall and left many other homeowners underwater. This severely impacted the market for the [mortgage-backed securities (MBSs)](https:\/\/www.investopedia.com\/terms\/m\/mbs.asp) that banks and other institutional investors held.\n\n## Origins and Consequences of the Great Recession\nThe 2001 dot-com bubble implosion, followed by the terrorist attacks of Sept. 11, 2001, hammered the U.S. economy. The Fed responded by cutting interest rates to the lowest levels to stimulate the economy, holding them low through mid-2004.\n\nCombined with federal policy to encourage homeownership, low interest rates helped spark a boom in [real estate](https:\/\/www.investopedia.com\/the-best-real-estate-websites-11721331) and financial markets and a dramatic expansion of the volume of total mortgage debt. Financial innovations, such as new types of [subprime](https:\/\/www.investopedia.com\/terms\/s\/subprimeloan.asp) and [adjustable mortgages](https:\/\/www.investopedia.com\/terms\/a\/arm.asp), allowed borrowers—many of whom otherwise might not have qualified—to obtain home loans on generous terms based on the expectation that interest rates would remain low and home prices would continue to rise.\n\nHowever, from 2004 through 2006, the Fed raised interest rates to control inflation. As interest rates rose, the flow of new credit through traditional banking channels into real estate slowed. More seriously, rates on existing adjustable [mortgages](https:\/\/www.investopedia.com\/the-best-mortgage-lenders-11714101) and exotic loans began to reset at much higher rates than many borrowers expected (or were led to expect by lenders). As monthly mortgage payments rose beyond borrowers’ ability to pay (and they could not simply refinance, as prices had stopped steadily rising), many borrowers started to sell. The increase in supply burst what was later widely recognized to be a [housing bubble](https:\/\/www.investopedia.com\/terms\/h\/housing_bubble.asp).\n\nDuring the U.S. housing boom, financial institutions sold MBSs and complex [derivative](https:\/\/www.investopedia.com\/terms\/d\/derivative.asp) products at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value. The credit markets that financed the housing bubble quickly followed housing prices into a downturn as a [credit crisis](https:\/\/www.investopedia.com\/terms\/c\/credit-crisis.asp) began unfolding in 2007. The [solvency](https:\/\/www.investopedia.com\/terms\/s\/solvency.asp) of over-leveraged banks and financial institutions hit a breaking point when [Bear Stearns](https:\/\/www.investopedia.com\/terms\/b\/bear-stearns.asp) collapsed in March 2008.\n\nThings came to a head later that year with [Lehman Brothers'](https:\/\/www.investopedia.com\/terms\/l\/lehman-brothers.asp) bankruptcy, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread globally, most notably in Europe. As a result of the Great Recession, the U.S. alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics. This doubled the unemployment rate. American households lost roughly \\$18 trillion in [net worth](https:\/\/www.investopedia.com\/terms\/n\/networth.asp) as the stock market plunged. The Great Recession officially ended in June 2009.\n\n### Important\nThe 2010 Dodd-Frank Act gave the government control of failing financial institutions and the ability to establish consumer protections against predatory lending.\n## Response to the Great Recession\nThe aggressive monetary policies that the Fed took, along with other central banks around the world, were widely credited with preventing even greater damage to the global economy. However, some also criticized the moves, claiming they made the recession last longer and laid the groundwork for later recessions.\n\n### Monetary and Fiscal Policy\nThe Fed lowered a key interest rate to nearly zero to promote [liquidity](https:\/\/www.investopedia.com\/terms\/l\/liquidity.asp). In an unprecedented move, it also provided banks with trillions of emergency loans in a policy known as [quantitative easing (QE)](https:\/\/www.investopedia.com\/terms\/q\/quantitative-easing.asp). Some estimates have the figures at a low \\$1.2 trillion, others at \\$7.7 trillion, and the highest estimate is \\$29 trillion.\n\nAlong with increasing liquidity, the U.S. federal government stimulated the economy by spending \\$787 billion under the [American Recovery and Reinvestment Act (ARRA)](https:\/\/www.investopedia.com\/terms\/a\/american-recovery-and-reinvestment-act.asp). This figure was later raised to \\$831 billion. These monetary and fiscal policies reduced immediate losses to major financial institutions and large corporations.\n\n### The Dodd-Frank Act\nNot only did the government introduce stimulus packages, but it also established new financial regulation. In the 1990s, the U.S. repealed the [Glass-Steagall Act](https:\/\/www.investopedia.com\/articles\/03\/071603.asp), a Depression-era regulation that separated investment from retail banking to reduce systemic risk. Some economists say this helped cause the crisis. The repeal allowed some large U.S. banks to merge and form larger institutions, many of which later failed and had to be [bailed out](https:\/\/www.investopedia.com\/terms\/t\/too-big-to-fail.asp#toc-financial-institutions).\n\nIn response, in 2010, the U.S. Congress passed, and then-President Barack Obama signed, the [Dodd-Frank Act](https:\/\/www.investopedia.com\/terms\/d\/dodd-frank-financial-regulatory-reform-bill.asp). This gave the government expanded power to regulate the financial sector, including greater control over financial institutions that were close to failing. It also created consumer protections against predatory lending.\n\nHowever, critics of the Dodd-Frank Act note that the financial sector players and institutions that actively drove and profited from predatory lending and related practices during the housing and financial bubbles were also deeply involved in both the drafting of the new law and in the agencies charged with its implementation.\n\n### Fast Fact\nThe U.S. federal government spent \\$831 billion (originally \\$787 billion) to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act.\n## Recovery From the Great Recession\nFollowing these policies, the economy gradually recovered. [Real GDP](https:\/\/www.investopedia.com\/terms\/r\/realgdp.asp) bottomed out in the second quarter of 2009 and regained its pre-recession peak in the third quarter of 2010, about two and a half years after the initial onset of the official recession. Financial markets recovered as the flood of liquidity washed over Wall Street.\n\nThe [Dow Jones Industrial Average (DJIA)](https:\/\/www.investopedia.com\/terms\/d\/djia.asp), which lost over half its value from its August 2007 peak, began to recover in March 2009 and broke its 2007 high in March 2013.\n\nFor workers and households, the picture was less rosy. Unemployment was at 5% at the end of 2007, reached a high of 10% in October 2009, and did not recover to 5% until 2015, nearly eight years after the beginning of the recession. Real median household income didn't recover to pre-recession levels until 2016.\n\nCritics of the policy response and how it shaped the recovery argue that the tidal wave of liquidity and deficit spending propped up politically connected financial institutions and big business at the expense of ordinary people. It also may have delayed recovery by tying up economic resources in industries and activities that deserved to fail, when those assets and resources could have been used by other businesses to expand and create jobs.\n\n## How Long Did the Great Recession Last?\nAccording to official Federal Reserve data, the Great Recession lasted 18 months, from December 2007 through June 2009.\n\n## Have There Been Recessions Since the Great Recession?\nYes, there was a recession from February 2020 to April 2020. It was the shortest recession on record.\n\n## How Much Did the Stock Market Crash During the Great Recession?\nOn Oct. 9, 2007, the Dow Jones closed at its pre-recession high of 14,164.53. By March 5, 2009, the index had fallen more than 50% to 6,594.44.\n\nOn Sept. 29, 2008, the Dow fell nearly 778 points in one day. It was the largest point drop in history until the market crashed in March 2020 during the COVID-19 pandemic.\n## The Bottom Line\nThe Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive [mortgage lending](https:\/\/www.investopedia.com\/the-best-mortgage-lenders-11714101) to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors.\n\nLow interest rates and poor regulatory oversight following the repeal of the Glass-Steagall Act compounded the problem, as credit was cheap and lending institutions had been freed from regulations that would have hampered their ability to mix commercial and investment banking, which Glass-Steagall had separated.\n\nAs the economy imploded and financial institutions failed, the U.S. government launched a massive bailout program, which included assistance for consumers and the many unemployed people via the \\$787 billion American Recovery and Reinvestment Act (ARRA). (It was later increased to \\$831 billion.) Most credit the bailouts and the ARRA with providing much-needed relief to the public and with saving the financial industry (along with other industries) from total failure. However, some assert the money used to bail out insolvent institutions could have been directed to more productive enterprises rather than using it to save failed ones.\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. Federal Reserve Bank of St. Louis. \"[How Bad Was the Great Depression? Gauging the Economic Impact](https:\/\/www.stlouisfed.org\/the-great-depression\/curriculum\/economic-episodes-in-american-history-part-3).\"\n2. Federal Reserve Bank of St. Louis, FRED. \"[Unemployment Rate](https:\/\/fred.stlouisfed.org\/series\/UNRATE\/).\"\n3. Federal Reserve Bank of St. Louis, FRED. “[Gross Domestic Product](https:\/\/fred.stlouisfed.org\/series\/GDP).”\n4. Federal Reserve History. \"[The Great Recession](https:\/\/www.federalreservehistory.org\/essays\/great-recession-of-200709).\"\n5. National Commission on the Causes of the Financial and Economic Crisis in the United States. “[The Financial Crisis Inquiry Report](https:\/\/www.govinfo.gov\/content\/pkg\/GPO-FCIC\/pdf\/GPO-FCIC.pdf).”\n6. Federal Reserve Bank of St. Louis, FRED. “[Federal Funds Effective Rate](https:\/\/fred.stlouisfed.org\/series\/FEDFUNDS).”\n7. National Commission on the Causes of the Financial and Economic Crisis in the United States. “[The Financial Crisis Inquiry Report](https:\/\/www.govinfo.gov\/content\/pkg\/GPO-FCIC\/pdf\/GPO-FCIC.pdf).” Pages 246-291.\n8. National Commission on the Causes of the Financial and Economic Crisis in the United States. “[The Financial Crisis Inquiry Report](https:\/\/www.govinfo.gov\/content\/pkg\/GPO-FCIC\/pdf\/GPO-FCIC.pdf).” Pages 324-343, 353-382.\n9. U.S. Bureau of Labor Statistics. \"[Consumer Spending and U.S. Employment from the 2007–2009 Recession Through 2022](https:\/\/www.bls.gov\/opub\/mlr\/2014\/article\/consumer-spending-and-us-employment-from-the-recession-through-2022.htm).\"\n10. Pollin, Robert. \"[U.S. Government Deficits and Debt Amid the Great Recession: What the Evidence Shows](https:\/\/peri.umass.edu\/wp-content\/uploads\/2025\/01\/WP263.pdf).\" *Political Economy Research Institute (PERI), Working Paper Series*, no. 263, August 2011, pp. 11.\n11. U.S. Congress. “[H.R.4173—Dodd-Frank Wall Street Reform and Consumer Protection Act](https:\/\/www.congress.gov\/bill\/111th-congress\/house-bill\/4173\/text).”\n12. Federal Reserve Bank of St. Louis. “[Quantitative Easing: How Well Does This Tool Work?](https:\/\/www.stlouisfed.org\/publications\/regional-economist\/third-quarter-2017\/quantitative-easing-how-well-does-this-tool-work)”\n13. Bloomberg. \"[Secret Fed Loans Gave Banks \\$13 Billion Undisclosed to Congress](https:\/\/www.bloomberg.com\/news\/articles\/2011-11-28\/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income).\"\n14. The Levy Economics Institute of Bard College. \"[\\$29,000,000,000,000: A Detailed Look at the Fed’s Bailout of the Financial System](https:\/\/www.levyinstitute.org\/publications\/29000000000000-a-detailed-look-at-the-feds-bailout-of-the-financial-system\/).\"\n15. Congressional Budget Office. \"[Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2011 Through December 2011](https:\/\/www.cbo.gov\/sites\/default\/files\/cbofiles\/attachments\/02-22-ARRA.pdf).\" Page 1.\n16. Federal Reserve History. \"[Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley)](https:\/\/www.federalreservehistory.org\/essays\/gramm-leach-bliley-act).\"\n17. Federal Reserve Bank of St. Louis, FRED. “[Real Gross Domestic Product](https:\/\/fred.stlouisfed.org\/graph\/?g=1Onup).\"\n18. Macrotrends. \"[Dow Jones - 100 Year Historical Chart](https:\/\/www.macrotrends.net\/1319\/dow-jones-100-year-historical-chart).\"\n19. Federal Reserve Bank of St. Louis, FRED. \"[Real Median Household Income in the United States](https:\/\/fred.stlouisfed.org\/series\/MEHOINUSA672N\/).\"\n20. National Bureau of Economic Research. \"[Business Cycle Dating](https:\/\/www.nber.org\/research\/business-cycle-dating).\"\n21. Yahoo! Finance. “[Dow Jones Industrial Average (^DJI)](https:\/\/finance.yahoo.com\/quote\/%5EDJI\/history?p=%5EDJI).”\n\nCompare Accounts\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.\n\nRead more\n\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n- [Markets](https:\/\/www.investopedia.com\/markets-4689752)\n- [International Markets](https:\/\/www.investopedia.com\/international-markets-4689750)\n\nPartner Links\n\nTake the Next Step to Invest\n\nAdvertiser Disclosure\n\n×\n\nThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. 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[Advertise](https:\/\/www.people.inc\/advertising)\n\n- [\\#](https:\/\/www.investopedia.com\/terms-beginning-with-num-4769350)\n- [A](https:\/\/www.investopedia.com\/terms-beginning-with-a-4769351)\n- [B](https:\/\/www.investopedia.com\/terms-beginning-with-b-4769352)\n- [C](https:\/\/www.investopedia.com\/terms-beginning-with-c-4769353)\n- [D](https:\/\/www.investopedia.com\/terms-beginning-with-d-4769354)\n- [E](https:\/\/www.investopedia.com\/terms-beginning-with-e-4769355)\n- [F](https:\/\/www.investopedia.com\/terms-beginning-with-f-4769356)\n- [G](https:\/\/www.investopedia.com\/terms-beginning-with-g-4769357)\n- [H](https:\/\/www.investopedia.com\/terms-beginning-with-h-4769358)\n- [I](https:\/\/www.investopedia.com\/terms-beginning-with-i-4769359)\n- [J](https:\/\/www.investopedia.com\/terms-beginning-with-j-4769360)\n- [K](https:\/\/www.investopedia.com\/terms-beginning-with-k-4769361)\n- [L](https:\/\/www.investopedia.com\/terms-beginning-with-l-4769362)\n- 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[Z](https:\/\/www.investopedia.com\/terms-beginning-with-z-4769376)\n\nInvestopedia is part of the [People Inc.](https:\/\/www.people.inc\/) publishing family.\n\nNewsletter Sign Up\n\nNewsletter Sign Up","attrs_readable_markdown":"### Key Takeaways\n- The Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis.\n- The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s.\n- In response to the Great Recession, unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some—but not all—credit with the subsequent recovery.\n## What Was the Great Recession?\nThe Great Recession was the sharp decline in economic activity that started in 2007. The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives plummeted in value.\n\n## Understanding the Great Recession\nThe term Great Recession is a play on the term Great Depression of the 1930s, when [gross domestic product (GDP)](https:\/\/www.investopedia.com\/terms\/g\/gdp.asp) declined more than 10%, and unemployment hit 25%.\n\nWhile no explicit criteria exist to differentiate a [depression](https:\/\/www.investopedia.com\/terms\/d\/depression.asp) from a severe recession, there is a near consensus among economists that the downturn of 2007 to 2009 was not a depression. During the Great Recession, U.S. GDP declined by 0.3% from 2008 to 2009, and unemployment briefly reached 10% in October 2009.\n\n### Important\nThe term Great Recession applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009.\n## Causes of the Great Recession\nAccording to a 2011 Financial Crisis Inquiry Commission report, the Great Recession was avoidable. The appointees, who included six Democrats and four Republicans, cited several key contributing factors that they determined led to the downturn.\n\nThe report first identified the government's failure to regulate the financial industry. This included the [Federal Reserve](https:\/\/www.investopedia.com\/terms\/f\/federalreservebank.asp)’s inability to stop banks from giving [mortgages](https:\/\/www.investopedia.com\/the-best-mortgage-lenders-11714101) to people who proved to be bad credit risks.\n\nNext, too many financial firms took on excess risk. The [shadow banking system](https:\/\/www.investopedia.com\/terms\/s\/shadow-banking-system.asp), which included investment firms, grew to rival the depository banking system but was not under the same scrutiny or regulation. The collapse of this system impacted the credit flow to consumers and businesses.\n\nThe report also identified excessive borrowing by consumers and corporations, along with lawmakers who didn't fully understand the collapsing financial system. This created asset [bubbles](https:\/\/www.investopedia.com\/terms\/b\/bubble.asp), especially in the housing market, as mortgages were extended at low interest rates to unqualified borrowers who couldn't repay them. The ensuing selloff caused housing prices to fall and left many other homeowners underwater. This severely impacted the market for the [mortgage-backed securities (MBSs)](https:\/\/www.investopedia.com\/terms\/m\/mbs.asp) that banks and other institutional investors held.\n\n## Origins and Consequences of the Great Recession\nThe 2001 dot-com bubble implosion, followed by the terrorist attacks of Sept. 11, 2001, hammered the U.S. economy. The Fed responded by cutting interest rates to the lowest levels to stimulate the economy, holding them low through mid-2004.\n\nCombined with federal policy to encourage homeownership, low interest rates helped spark a boom in [real estate](https:\/\/www.investopedia.com\/the-best-real-estate-websites-11721331) and financial markets and a dramatic expansion of the volume of total mortgage debt. Financial innovations, such as new types of [subprime](https:\/\/www.investopedia.com\/terms\/s\/subprimeloan.asp) and [adjustable mortgages](https:\/\/www.investopedia.com\/terms\/a\/arm.asp), allowed borrowers—many of whom otherwise might not have qualified—to obtain home loans on generous terms based on the expectation that interest rates would remain low and home prices would continue to rise.\n\nHowever, from 2004 through 2006, the Fed raised interest rates to control inflation. As interest rates rose, the flow of new credit through traditional banking channels into real estate slowed. More seriously, rates on existing adjustable [mortgages](https:\/\/www.investopedia.com\/the-best-mortgage-lenders-11714101) and exotic loans began to reset at much higher rates than many borrowers expected (or were led to expect by lenders). As monthly mortgage payments rose beyond borrowers’ ability to pay (and they could not simply refinance, as prices had stopped steadily rising), many borrowers started to sell. The increase in supply burst what was later widely recognized to be a [housing bubble](https:\/\/www.investopedia.com\/terms\/h\/housing_bubble.asp).\n\nDuring the U.S. housing boom, financial institutions sold MBSs and complex [derivative](https:\/\/www.investopedia.com\/terms\/d\/derivative.asp) products at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value. The credit markets that financed the housing bubble quickly followed housing prices into a downturn as a [credit crisis](https:\/\/www.investopedia.com\/terms\/c\/credit-crisis.asp) began unfolding in 2007. The [solvency](https:\/\/www.investopedia.com\/terms\/s\/solvency.asp) of over-leveraged banks and financial institutions hit a breaking point when [Bear Stearns](https:\/\/www.investopedia.com\/terms\/b\/bear-stearns.asp) collapsed in March 2008.\n\nThings came to a head later that year with [Lehman Brothers'](https:\/\/www.investopedia.com\/terms\/l\/lehman-brothers.asp) bankruptcy, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread globally, most notably in Europe. As a result of the Great Recession, the U.S. alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics. This doubled the unemployment rate. American households lost roughly \\$18 trillion in [net worth](https:\/\/www.investopedia.com\/terms\/n\/networth.asp) as the stock market plunged. The Great Recession officially ended in June 2009.\n\n### Important\nThe 2010 Dodd-Frank Act gave the government control of failing financial institutions and the ability to establish consumer protections against predatory lending.\n## Response to the Great Recession\nThe aggressive monetary policies that the Fed took, along with other central banks around the world, were widely credited with preventing even greater damage to the global economy. However, some also criticized the moves, claiming they made the recession last longer and laid the groundwork for later recessions.\n\n### Monetary and Fiscal Policy\nThe Fed lowered a key interest rate to nearly zero to promote [liquidity](https:\/\/www.investopedia.com\/terms\/l\/liquidity.asp). In an unprecedented move, it also provided banks with trillions of emergency loans in a policy known as [quantitative easing (QE)](https:\/\/www.investopedia.com\/terms\/q\/quantitative-easing.asp). Some estimates have the figures at a low \\$1.2 trillion, others at \\$7.7 trillion, and the highest estimate is \\$29 trillion.\n\nAlong with increasing liquidity, the U.S. federal government stimulated the economy by spending \\$787 billion under the [American Recovery and Reinvestment Act (ARRA)](https:\/\/www.investopedia.com\/terms\/a\/american-recovery-and-reinvestment-act.asp). This figure was later raised to \\$831 billion. These monetary and fiscal policies reduced immediate losses to major financial institutions and large corporations.\n\n### The Dodd-Frank Act\nNot only did the government introduce stimulus packages, but it also established new financial regulation. In the 1990s, the U.S. repealed the [Glass-Steagall Act](https:\/\/www.investopedia.com\/articles\/03\/071603.asp), a Depression-era regulation that separated investment from retail banking to reduce systemic risk. Some economists say this helped cause the crisis. The repeal allowed some large U.S. banks to merge and form larger institutions, many of which later failed and had to be [bailed out](https:\/\/www.investopedia.com\/terms\/t\/too-big-to-fail.asp#toc-financial-institutions).\n\nIn response, in 2010, the U.S. Congress passed, and then-President Barack Obama signed, the [Dodd-Frank Act](https:\/\/www.investopedia.com\/terms\/d\/dodd-frank-financial-regulatory-reform-bill.asp). This gave the government expanded power to regulate the financial sector, including greater control over financial institutions that were close to failing. It also created consumer protections against predatory lending.\n\nHowever, critics of the Dodd-Frank Act note that the financial sector players and institutions that actively drove and profited from predatory lending and related practices during the housing and financial bubbles were also deeply involved in both the drafting of the new law and in the agencies charged with its implementation.\n\n### Fast Fact\nThe U.S. federal government spent \\$831 billion (originally \\$787 billion) to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act.\n## Recovery From the Great Recession\nFollowing these policies, the economy gradually recovered. [Real GDP](https:\/\/www.investopedia.com\/terms\/r\/realgdp.asp) bottomed out in the second quarter of 2009 and regained its pre-recession peak in the third quarter of 2010, about two and a half years after the initial onset of the official recession. Financial markets recovered as the flood of liquidity washed over Wall Street.\n\nThe [Dow Jones Industrial Average (DJIA)](https:\/\/www.investopedia.com\/terms\/d\/djia.asp), which lost over half its value from its August 2007 peak, began to recover in March 2009 and broke its 2007 high in March 2013.\n\nFor workers and households, the picture was less rosy. Unemployment was at 5% at the end of 2007, reached a high of 10% in October 2009, and did not recover to 5% until 2015, nearly eight years after the beginning of the recession. Real median household income didn't recover to pre-recession levels until 2016.\n\nCritics of the policy response and how it shaped the recovery argue that the tidal wave of liquidity and deficit spending propped up politically connected financial institutions and big business at the expense of ordinary people. It also may have delayed recovery by tying up economic resources in industries and activities that deserved to fail, when those assets and resources could have been used by other businesses to expand and create jobs.\n\n## How Long Did the Great Recession Last?\nAccording to official Federal Reserve data, the Great Recession lasted 18 months, from December 2007 through June 2009.\n\n## Have There Been Recessions Since the Great Recession?\nYes, there was a recession from February 2020 to April 2020. It was the shortest recession on record.\n\n## How Much Did the Stock Market Crash During the Great Recession?\nOn Oct. 9, 2007, the Dow Jones closed at its pre-recession high of 14,164.53. By March 5, 2009, the index had fallen more than 50% to 6,594.44.\n\nOn Sept. 29, 2008, the Dow fell nearly 778 points in one day. It was the largest point drop in history until the market crashed in March 2020 during the COVID-19 pandemic.\n## The Bottom Line\nThe Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive [mortgage lending](https:\/\/www.investopedia.com\/the-best-mortgage-lenders-11714101) to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors.\n\nLow interest rates and poor regulatory oversight following the repeal of the Glass-Steagall Act compounded the problem, as credit was cheap and lending institutions had been freed from regulations that would have hampered their ability to mix commercial and investment banking, which Glass-Steagall had separated.\n\nAs the economy imploded and financial institutions failed, the U.S. government launched a massive bailout program, which included assistance for consumers and the many unemployed people via the \\$787 billion American Recovery and Reinvestment Act (ARRA). (It was later increased to \\$831 billion.) Most credit the bailouts and the ARRA with providing much-needed relief to the public and with saving the financial industry (along with other industries) from total failure. However, some assert the money used to bail out insolvent institutions could have been directed to more productive enterprises rather than using it to save failed ones.","meta_canonical":null}

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Boilerpipe Text	Key Takeaways The Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis. The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s. In response to the Great Recession, unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some—but not all—credit with the subsequent recovery. What Was the Great Recession? The Great Recession was the sharp decline in economic activity that started in 2007. The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives plummeted in value. Understanding the Great Recession The term Great Recession is a play on the term Great Depression of the 1930s, when gross domestic product (GDP) declined more than 10%, and unemployment hit 25%. While no explicit criteria exist to differentiate a depression from a severe recession, there is a near consensus among economists that the downturn of 2007 to 2009 was not a depression. During the Great Recession, U.S. GDP declined by 0.3% from 2008 to 2009, and unemployment briefly reached 10% in October 2009. Important The term Great Recession applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009. Causes of the Great Recession According to a 2011 Financial Crisis Inquiry Commission report, the Great Recession was avoidable. The appointees, who included six Democrats and four Republicans, cited several key contributing factors that they determined led to the downturn. The report first identified the government's failure to regulate the financial industry. This included the Federal Reserve ’s inability to stop banks from giving mortgages to people who proved to be bad credit risks. Next, too many financial firms took on excess risk. The shadow banking system , which included investment firms, grew to rival the depository banking system but was not under the same scrutiny or regulation. The collapse of this system impacted the credit flow to consumers and businesses. The report also identified excessive borrowing by consumers and corporations, along with lawmakers who didn't fully understand the collapsing financial system. This created asset bubbles , especially in the housing market, as mortgages were extended at low interest rates to unqualified borrowers who couldn't repay them. The ensuing selloff caused housing prices to fall and left many other homeowners underwater. This severely impacted the market for the mortgage-backed securities (MBSs) that banks and other institutional investors held. Origins and Consequences of the Great Recession The 2001 dot-com bubble implosion, followed by the terrorist attacks of Sept. 11, 2001, hammered the U.S. economy. The Fed responded by cutting interest rates to the lowest levels to stimulate the economy, holding them low through mid-2004. Combined with federal policy to encourage homeownership, low interest rates helped spark a boom in real estate and financial markets and a dramatic expansion of the volume of total mortgage debt. Financial innovations, such as new types of subprime and adjustable mortgages , allowed borrowers—many of whom otherwise might not have qualified—to obtain home loans on generous terms based on the expectation that interest rates would remain low and home prices would continue to rise. However, from 2004 through 2006, the Fed raised interest rates to control inflation. As interest rates rose, the flow of new credit through traditional banking channels into real estate slowed. More seriously, rates on existing adjustable mortgages and exotic loans began to reset at much higher rates than many borrowers expected (or were led to expect by lenders). As monthly mortgage payments rose beyond borrowers’ ability to pay (and they could not simply refinance, as prices had stopped steadily rising), many borrowers started to sell. The increase in supply burst what was later widely recognized to be a housing bubble . During the U.S. housing boom, financial institutions sold MBSs and complex derivative products at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value. The credit markets that financed the housing bubble quickly followed housing prices into a downturn as a credit crisis began unfolding in 2007. The solvency of over-leveraged banks and financial institutions hit a breaking point when Bear Stearns collapsed in March 2008. Things came to a head later that year with Lehman Brothers' bankruptcy, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread globally, most notably in Europe. As a result of the Great Recession, the U.S. alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics. This doubled the unemployment rate. American households lost roughly $18 trillion in net worth as the stock market plunged. The Great Recession officially ended in June 2009. Important The 2010 Dodd-Frank Act gave the government control of failing financial institutions and the ability to establish consumer protections against predatory lending. Response to the Great Recession The aggressive monetary policies that the Fed took, along with other central banks around the world, were widely credited with preventing even greater damage to the global economy. However, some also criticized the moves, claiming they made the recession last longer and laid the groundwork for later recessions. Monetary and Fiscal Policy The Fed lowered a key interest rate to nearly zero to promote liquidity . In an unprecedented move, it also provided banks with trillions of emergency loans in a policy known as quantitative easing (QE) . Some estimates have the figures at a low $1.2 trillion, others at $7.7 trillion, and the highest estimate is $29 trillion. Along with increasing liquidity, the U.S. federal government stimulated the economy by spending $787 billion under the American Recovery and Reinvestment Act (ARRA) . This figure was later raised to $831 billion. These monetary and fiscal policies reduced immediate losses to major financial institutions and large corporations. The Dodd-Frank Act Not only did the government introduce stimulus packages, but it also established new financial regulation. In the 1990s, the U.S. repealed the Glass-Steagall Act , a Depression-era regulation that separated investment from retail banking to reduce systemic risk. Some economists say this helped cause the crisis. The repeal allowed some large U.S. banks to merge and form larger institutions, many of which later failed and had to be bailed out . In response, in 2010, the U.S. Congress passed, and then-President Barack Obama signed, the Dodd-Frank Act . This gave the government expanded power to regulate the financial sector, including greater control over financial institutions that were close to failing. It also created consumer protections against predatory lending. However, critics of the Dodd-Frank Act note that the financial sector players and institutions that actively drove and profited from predatory lending and related practices during the housing and financial bubbles were also deeply involved in both the drafting of the new law and in the agencies charged with its implementation. Fast Fact The U.S. federal government spent $831 billion (originally $787 billion) to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act. Recovery From the Great Recession Following these policies, the economy gradually recovered. Real GDP bottomed out in the second quarter of 2009 and regained its pre-recession peak in the third quarter of 2010, about two and a half years after the initial onset of the official recession. Financial markets recovered as the flood of liquidity washed over Wall Street. The Dow Jones Industrial Average (DJIA) , which lost over half its value from its August 2007 peak, began to recover in March 2009 and broke its 2007 high in March 2013. For workers and households, the picture was less rosy. Unemployment was at 5% at the end of 2007, reached a high of 10% in October 2009, and did not recover to 5% until 2015, nearly eight years after the beginning of the recession. Real median household income didn't recover to pre-recession levels until 2016. Critics of the policy response and how it shaped the recovery argue that the tidal wave of liquidity and deficit spending propped up politically connected financial institutions and big business at the expense of ordinary people. It also may have delayed recovery by tying up economic resources in industries and activities that deserved to fail, when those assets and resources could have been used by other businesses to expand and create jobs. How Long Did the Great Recession Last? According to official Federal Reserve data, the Great Recession lasted 18 months, from December 2007 through June 2009. Have There Been Recessions Since the Great Recession? Yes, there was a recession from February 2020 to April 2020. It was the shortest recession on record. How Much Did the Stock Market Crash During the Great Recession? On Oct. 9, 2007, the Dow Jones closed at its pre-recession high of 14,164.53. By March 5, 2009, the index had fallen more than 50% to 6,594.44. On Sept. 29, 2008, the Dow fell nearly 778 points in one day. It was the largest point drop in history until the market crashed in March 2020 during the COVID-19 pandemic. The Bottom Line The Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive mortgage lending to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors. Low interest rates and poor regulatory oversight following the repeal of the Glass-Steagall Act compounded the problem, as credit was cheap and lending institutions had been freed from regulations that would have hampered their ability to mix commercial and investment banking, which Glass-Steagall had separated. As the economy imploded and financial institutions failed, the U.S. government launched a massive bailout program, which included assistance for consumers and the many unemployed people via the $787 billion American Recovery and Reinvestment Act (ARRA). (It was later increased to $831 billion.) Most credit the bailouts and the ARRA with providing much-needed relief to the public and with saving the financial industry (along with other industries) from total failure. However, some assert the money used to bail out insolvent institutions could have been directed to more productive enterprises rather than using it to save failed ones.
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Blame the Stock Market](https://www.investopedia.com/why-is-inflation-so-stubbornly-high-blame-the-stock-market-11944367) Table of Contents Expand Table of Contents - [What Was the Great Recession?](https://www.investopedia.com/terms/g/great-recession.asp#toc-what-was-the-great-recession) - [Understanding the Great Recession](https://www.investopedia.com/terms/g/great-recession.asp#toc-understanding-the-great-recession) - [Causes](https://www.investopedia.com/terms/g/great-recession.asp#toc-causes-of-the-great-recession) - [Origins and Consequences](https://www.investopedia.com/terms/g/great-recession.asp#toc-origins-and-consequences-of-the-great-recession) - [Response](https://www.investopedia.com/terms/g/great-recession.asp#toc-response-to-the-great-recession) - [Recovery](https://www.investopedia.com/terms/g/great-recession.asp#toc-recovery-from-the-great-recession) - [FAQs](https://www.investopedia.com/terms/g/great-recession.asp#toc-how-long-did-the-great-recession-last) - [The Bottom Line](https://www.investopedia.com/terms/g/great-recession.asp#toc-the-bottom-line) # Great Recession: What It Was and What Caused It By [The Investopedia Team](https://www.investopedia.com/contributors/0/) ![Investopedia logo ]() ![Investopedia logo ](https://www.investopedia.com/thmb/KwYTCWLo2xihE5JwkFJcd48EzyQ=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/Group1805-3b9f749674f0434184ef75020339bd35.jpg) [Full Bio](https://www.investopedia.com/contributors/0/) Investopedia contributors come from a range of backgrounds, and over 25 years there have been thousands of expert writers and editors who have contributed. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Updated December 23, 2025 Reviewed by [Michael J Boyle](https://www.investopedia.com/michael-j-boyle-4799785) ![Michael Boyle]() ![Michael Boyle](https://www.investopedia.com/thmb/Ds39WPMbYISxbsTYRr8lNF5xP80=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/image0-MichaelBoyle-d90f2cc61d274246a2be03cdd144f699.jpeg) Reviewed by Michael J Boyle [Full Bio](https://www.investopedia.com/michael-j-boyle-4799785) Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics. Learn about our [Financial Review Board](https://www.investopedia.com/investopedia-financial-review-board-5076269) Fact checked by [Vikki Velasquez](https://www.investopedia.com/vikki-velasquez-5198872) ![Vikkie Velasquez]() ![Vikkie Velasquez](https://www.investopedia.com/thmb/qsiqwN4603qvBBcEmwBBFAZ7h-8=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/vikki-velasquez-investopedia-portrait-1-18b989d75f1f4d6d9b5b3a47cb3ffc5f.jpg) Fact checked by Vikki Velasquez [Full Bio](https://www.investopedia.com/vikki-velasquez-5198872) Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area. Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) ![The Great Recession](https://www.investopedia.com/thmb/1ct4l03zPw_-STbF8BREGkgBt5w=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/great-recession_sourcefile-1-26478e8a0b5e48ce9df18f92cc991a7e.jpg) ![The Great Recession](https://www.investopedia.com/thmb/1ct4l03zPw_-STbF8BREGkgBt5w=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/great-recession_sourcefile-1-26478e8a0b5e48ce9df18f92cc991a7e.jpg) The Great Recession saw a decline of the housing market and employment, and also hurt household incomes and retirement savings. NoNo Flores / Investopedia Close Definition The Great Recession was a severe and global economic downturn from 2007 to 2009 that was triggered primarily by the collapse of the U.S. housing market and the resulting financial crisis. ### Key Takeaways - The Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis. - The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s. - In response to the Great Recession, unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some—but not all—credit with the subsequent recovery. ## What Was the Great Recession? The Great Recession was the sharp decline in economic activity that started in 2007. The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives plummeted in value. ## Understanding the Great Recession The term Great Recession is a play on the term Great Depression of the 1930s, when [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp) declined more than 10%, and unemployment hit 25%. While no explicit criteria exist to differentiate a [depression](https://www.investopedia.com/terms/d/depression.asp) from a severe recession, there is a near consensus among economists that the downturn of 2007 to 2009 was not a depression. During the Great Recession, U.S. GDP declined by 0.3% from 2008 to 2009, and unemployment briefly reached 10% in October 2009. ### Important The term Great Recession applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009. ## Causes of the Great Recession According to a 2011 Financial Crisis Inquiry Commission report, the Great Recession was avoidable. The appointees, who included six Democrats and four Republicans, cited several key contributing factors that they determined led to the downturn. The report first identified the government's failure to regulate the financial industry. This included the [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp)’s inability to stop banks from giving [mortgages](https://www.investopedia.com/the-best-mortgage-lenders-11714101) to people who proved to be bad credit risks. Next, too many financial firms took on excess risk. The [shadow banking system](https://www.investopedia.com/terms/s/shadow-banking-system.asp), which included investment firms, grew to rival the depository banking system but was not under the same scrutiny or regulation. The collapse of this system impacted the credit flow to consumers and businesses. The report also identified excessive borrowing by consumers and corporations, along with lawmakers who didn't fully understand the collapsing financial system. This created asset [bubbles](https://www.investopedia.com/terms/b/bubble.asp), especially in the housing market, as mortgages were extended at low interest rates to unqualified borrowers who couldn't repay them. The ensuing selloff caused housing prices to fall and left many other homeowners underwater. This severely impacted the market for the [mortgage-backed securities (MBSs)](https://www.investopedia.com/terms/m/mbs.asp) that banks and other institutional investors held. ## Origins and Consequences of the Great Recession The 2001 dot-com bubble implosion, followed by the terrorist attacks of Sept. 11, 2001, hammered the U.S. economy. The Fed responded by cutting interest rates to the lowest levels to stimulate the economy, holding them low through mid-2004. Combined with federal policy to encourage homeownership, low interest rates helped spark a boom in [real estate](https://www.investopedia.com/the-best-real-estate-websites-11721331) and financial markets and a dramatic expansion of the volume of total mortgage debt. Financial innovations, such as new types of [subprime](https://www.investopedia.com/terms/s/subprimeloan.asp) and [adjustable mortgages](https://www.investopedia.com/terms/a/arm.asp), allowed borrowers—many of whom otherwise might not have qualified—to obtain home loans on generous terms based on the expectation that interest rates would remain low and home prices would continue to rise. However, from 2004 through 2006, the Fed raised interest rates to control inflation. As interest rates rose, the flow of new credit through traditional banking channels into real estate slowed. More seriously, rates on existing adjustable [mortgages](https://www.investopedia.com/the-best-mortgage-lenders-11714101) and exotic loans began to reset at much higher rates than many borrowers expected (or were led to expect by lenders). As monthly mortgage payments rose beyond borrowers’ ability to pay (and they could not simply refinance, as prices had stopped steadily rising), many borrowers started to sell. The increase in supply burst what was later widely recognized to be a [housing bubble](https://www.investopedia.com/terms/h/housing_bubble.asp). During the U.S. housing boom, financial institutions sold MBSs and complex [derivative](https://www.investopedia.com/terms/d/derivative.asp) products at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value. The credit markets that financed the housing bubble quickly followed housing prices into a downturn as a [credit crisis](https://www.investopedia.com/terms/c/credit-crisis.asp) began unfolding in 2007. The [solvency](https://www.investopedia.com/terms/s/solvency.asp) of over-leveraged banks and financial institutions hit a breaking point when [Bear Stearns](https://www.investopedia.com/terms/b/bear-stearns.asp) collapsed in March 2008. Things came to a head later that year with [Lehman Brothers'](https://www.investopedia.com/terms/l/lehman-brothers.asp) bankruptcy, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread globally, most notably in Europe. As a result of the Great Recession, the U.S. alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics. This doubled the unemployment rate. American households lost roughly \$18 trillion in [net worth](https://www.investopedia.com/terms/n/networth.asp) as the stock market plunged. The Great Recession officially ended in June 2009. ### Important The 2010 Dodd-Frank Act gave the government control of failing financial institutions and the ability to establish consumer protections against predatory lending. ## Response to the Great Recession The aggressive monetary policies that the Fed took, along with other central banks around the world, were widely credited with preventing even greater damage to the global economy. However, some also criticized the moves, claiming they made the recession last longer and laid the groundwork for later recessions. ### Monetary and Fiscal Policy The Fed lowered a key interest rate to nearly zero to promote [liquidity](https://www.investopedia.com/terms/l/liquidity.asp). In an unprecedented move, it also provided banks with trillions of emergency loans in a policy known as [quantitative easing (QE)](https://www.investopedia.com/terms/q/quantitative-easing.asp). Some estimates have the figures at a low \$1.2 trillion, others at \$7.7 trillion, and the highest estimate is \$29 trillion. Along with increasing liquidity, the U.S. federal government stimulated the economy by spending \$787 billion under the [American Recovery and Reinvestment Act (ARRA)](https://www.investopedia.com/terms/a/american-recovery-and-reinvestment-act.asp). This figure was later raised to \$831 billion. These monetary and fiscal policies reduced immediate losses to major financial institutions and large corporations. ### The Dodd-Frank Act Not only did the government introduce stimulus packages, but it also established new financial regulation. In the 1990s, the U.S. repealed the [Glass-Steagall Act](https://www.investopedia.com/articles/03/071603.asp), a Depression-era regulation that separated investment from retail banking to reduce systemic risk. Some economists say this helped cause the crisis. The repeal allowed some large U.S. banks to merge and form larger institutions, many of which later failed and had to be [bailed out](https://www.investopedia.com/terms/t/too-big-to-fail.asp#toc-financial-institutions). In response, in 2010, the U.S. Congress passed, and then-President Barack Obama signed, the [Dodd-Frank Act](https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp). This gave the government expanded power to regulate the financial sector, including greater control over financial institutions that were close to failing. It also created consumer protections against predatory lending. However, critics of the Dodd-Frank Act note that the financial sector players and institutions that actively drove and profited from predatory lending and related practices during the housing and financial bubbles were also deeply involved in both the drafting of the new law and in the agencies charged with its implementation. ### Fast Fact The U.S. federal government spent \$831 billion (originally \$787 billion) to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act. ## Recovery From the Great Recession Following these policies, the economy gradually recovered. [Real GDP](https://www.investopedia.com/terms/r/realgdp.asp) bottomed out in the second quarter of 2009 and regained its pre-recession peak in the third quarter of 2010, about two and a half years after the initial onset of the official recession. Financial markets recovered as the flood of liquidity washed over Wall Street. The [Dow Jones Industrial Average (DJIA)](https://www.investopedia.com/terms/d/djia.asp), which lost over half its value from its August 2007 peak, began to recover in March 2009 and broke its 2007 high in March 2013. For workers and households, the picture was less rosy. Unemployment was at 5% at the end of 2007, reached a high of 10% in October 2009, and did not recover to 5% until 2015, nearly eight years after the beginning of the recession. Real median household income didn't recover to pre-recession levels until 2016. Critics of the policy response and how it shaped the recovery argue that the tidal wave of liquidity and deficit spending propped up politically connected financial institutions and big business at the expense of ordinary people. It also may have delayed recovery by tying up economic resources in industries and activities that deserved to fail, when those assets and resources could have been used by other businesses to expand and create jobs. ## How Long Did the Great Recession Last? According to official Federal Reserve data, the Great Recession lasted 18 months, from December 2007 through June 2009. ## Have There Been Recessions Since the Great Recession? Yes, there was a recession from February 2020 to April 2020. It was the shortest recession on record. ## How Much Did the Stock Market Crash During the Great Recession? On Oct. 9, 2007, the Dow Jones closed at its pre-recession high of 14,164.53. By March 5, 2009, the index had fallen more than 50% to 6,594.44. On Sept. 29, 2008, the Dow fell nearly 778 points in one day. It was the largest point drop in history until the market crashed in March 2020 during the COVID-19 pandemic. ## The Bottom Line The Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive [mortgage lending](https://www.investopedia.com/the-best-mortgage-lenders-11714101) to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors. Low interest rates and poor regulatory oversight following the repeal of the Glass-Steagall Act compounded the problem, as credit was cheap and lending institutions had been freed from regulations that would have hampered their ability to mix commercial and investment banking, which Glass-Steagall had separated. As the economy imploded and financial institutions failed, the U.S. government launched a massive bailout program, which included assistance for consumers and the many unemployed people via the \$787 billion American Recovery and Reinvestment Act (ARRA). (It was later increased to \$831 billion.) Most credit the bailouts and the ARRA with providing much-needed relief to the public and with saving the financial industry (along with other industries) from total failure. However, some assert the money used to bail out insolvent institutions could have been directed to more productive enterprises rather than using it to save failed ones. Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Federal Reserve Bank of St. Louis. "[How Bad Was the Great Depression? Gauging the Economic Impact](https://www.stlouisfed.org/the-great-depression/curriculum/economic-episodes-in-american-history-part-3)." 2. Federal Reserve Bank of St. Louis, FRED. "[Unemployment Rate](https://fred.stlouisfed.org/series/UNRATE/)." 3. Federal Reserve Bank of St. Louis, FRED. “[Gross Domestic Product](https://fred.stlouisfed.org/series/GDP).” 4. Federal Reserve History. "[The Great Recession](https://www.federalreservehistory.org/essays/great-recession-of-200709)." 5. National Commission on the Causes of the Financial and Economic Crisis in the United States. “[The Financial Crisis Inquiry Report](https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf).” 6. Federal Reserve Bank of St. Louis, FRED. “[Federal Funds Effective Rate](https://fred.stlouisfed.org/series/FEDFUNDS).” 7. National Commission on the Causes of the Financial and Economic Crisis in the United States. “[The Financial Crisis Inquiry Report](https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf).” Pages 246-291. 8. National Commission on the Causes of the Financial and Economic Crisis in the United States. “[The Financial Crisis Inquiry Report](https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf).” Pages 324-343, 353-382. 9. U.S. Bureau of Labor Statistics. "[Consumer Spending and U.S. Employment from the 2007–2009 Recession Through 2022](https://www.bls.gov/opub/mlr/2014/article/consumer-spending-and-us-employment-from-the-recession-through-2022.htm)." 10. Pollin, Robert. "[U.S. Government Deficits and Debt Amid the Great Recession: What the Evidence Shows](https://peri.umass.edu/wp-content/uploads/2025/01/WP263.pdf)." Political Economy Research Institute (PERI), Working Paper Series, no. 263, August 2011, pp. 11. 11. U.S. Congress. “[H.R.4173—Dodd-Frank Wall Street Reform and Consumer Protection Act](https://www.congress.gov/bill/111th-congress/house-bill/4173/text).” 12. Federal Reserve Bank of St. Louis. “[Quantitative Easing: How Well Does This Tool Work?](https://www.stlouisfed.org/publications/regional-economist/third-quarter-2017/quantitative-easing-how-well-does-this-tool-work)” 13. Bloomberg. "[Secret Fed Loans Gave Banks \$13 Billion Undisclosed to Congress](https://www.bloomberg.com/news/articles/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income)." 14. The Levy Economics Institute of Bard College. "[\$29,000,000,000,000: A Detailed Look at the Fed’s Bailout of the Financial System](https://www.levyinstitute.org/publications/29000000000000-a-detailed-look-at-the-feds-bailout-of-the-financial-system/)." 15. Congressional Budget Office. "[Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2011 Through December 2011](https://www.cbo.gov/sites/default/files/cbofiles/attachments/02-22-ARRA.pdf)." Page 1. 16. Federal Reserve History. "[Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley)](https://www.federalreservehistory.org/essays/gramm-leach-bliley-act)." 17. Federal Reserve Bank of St. Louis, FRED. “[Real Gross Domestic Product](https://fred.stlouisfed.org/graph/?g=1Onup)." 18. Macrotrends. "[Dow Jones - 100 Year Historical Chart](https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart)." 19. Federal Reserve Bank of St. Louis, FRED. "[Real Median Household Income in the United States](https://fred.stlouisfed.org/series/MEHOINUSA672N/)." 20. National Bureau of Economic Research. "[Business Cycle Dating](https://www.nber.org/research/business-cycle-dating)." 21. Yahoo! Finance. “[Dow Jones Industrial Average (^DJI)](https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI).” Compare Accounts Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Read more - [Investing](https://www.investopedia.com/investing-4427685) - [Markets](https://www.investopedia.com/markets-4689752) - [International Markets](https://www.investopedia.com/international-markets-4689750) Partner Links Take the Next Step to Invest Advertiser Disclosure × The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. 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Readable Markdown	### Key Takeaways - The Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis. - The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s. - In response to the Great Recession, unprecedented fiscal, monetary, and regulatory policy was unleashed by federal authorities, which some—but not all—credit with the subsequent recovery. ## What Was the Great Recession? The Great Recession was the sharp decline in economic activity that started in 2007. The economic slump began when the U.S. housing market went from boom to bust, and large amounts of mortgage-backed securities (MBS) and derivatives plummeted in value. ## Understanding the Great Recession The term Great Recession is a play on the term Great Depression of the 1930s, when [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp) declined more than 10%, and unemployment hit 25%. While no explicit criteria exist to differentiate a [depression](https://www.investopedia.com/terms/d/depression.asp) from a severe recession, there is a near consensus among economists that the downturn of 2007 to 2009 was not a depression. During the Great Recession, U.S. GDP declined by 0.3% from 2008 to 2009, and unemployment briefly reached 10% in October 2009. ### Important The term Great Recession applies to both the U.S. recession, officially lasting from December 2007 to June 2009, and the ensuing global recession in 2009. ## Causes of the Great Recession According to a 2011 Financial Crisis Inquiry Commission report, the Great Recession was avoidable. The appointees, who included six Democrats and four Republicans, cited several key contributing factors that they determined led to the downturn. The report first identified the government's failure to regulate the financial industry. This included the [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp)’s inability to stop banks from giving [mortgages](https://www.investopedia.com/the-best-mortgage-lenders-11714101) to people who proved to be bad credit risks. Next, too many financial firms took on excess risk. The [shadow banking system](https://www.investopedia.com/terms/s/shadow-banking-system.asp), which included investment firms, grew to rival the depository banking system but was not under the same scrutiny or regulation. The collapse of this system impacted the credit flow to consumers and businesses. The report also identified excessive borrowing by consumers and corporations, along with lawmakers who didn't fully understand the collapsing financial system. This created asset [bubbles](https://www.investopedia.com/terms/b/bubble.asp), especially in the housing market, as mortgages were extended at low interest rates to unqualified borrowers who couldn't repay them. The ensuing selloff caused housing prices to fall and left many other homeowners underwater. This severely impacted the market for the [mortgage-backed securities (MBSs)](https://www.investopedia.com/terms/m/mbs.asp) that banks and other institutional investors held. ## Origins and Consequences of the Great Recession The 2001 dot-com bubble implosion, followed by the terrorist attacks of Sept. 11, 2001, hammered the U.S. economy. The Fed responded by cutting interest rates to the lowest levels to stimulate the economy, holding them low through mid-2004. Combined with federal policy to encourage homeownership, low interest rates helped spark a boom in [real estate](https://www.investopedia.com/the-best-real-estate-websites-11721331) and financial markets and a dramatic expansion of the volume of total mortgage debt. Financial innovations, such as new types of [subprime](https://www.investopedia.com/terms/s/subprimeloan.asp) and [adjustable mortgages](https://www.investopedia.com/terms/a/arm.asp), allowed borrowers—many of whom otherwise might not have qualified—to obtain home loans on generous terms based on the expectation that interest rates would remain low and home prices would continue to rise. However, from 2004 through 2006, the Fed raised interest rates to control inflation. As interest rates rose, the flow of new credit through traditional banking channels into real estate slowed. More seriously, rates on existing adjustable [mortgages](https://www.investopedia.com/the-best-mortgage-lenders-11714101) and exotic loans began to reset at much higher rates than many borrowers expected (or were led to expect by lenders). As monthly mortgage payments rose beyond borrowers’ ability to pay (and they could not simply refinance, as prices had stopped steadily rising), many borrowers started to sell. The increase in supply burst what was later widely recognized to be a [housing bubble](https://www.investopedia.com/terms/h/housing_bubble.asp). During the U.S. housing boom, financial institutions sold MBSs and complex [derivative](https://www.investopedia.com/terms/d/derivative.asp) products at unprecedented levels. When the real estate market collapsed in 2007, these securities declined precipitously in value. The credit markets that financed the housing bubble quickly followed housing prices into a downturn as a [credit crisis](https://www.investopedia.com/terms/c/credit-crisis.asp) began unfolding in 2007. The [solvency](https://www.investopedia.com/terms/s/solvency.asp) of over-leveraged banks and financial institutions hit a breaking point when [Bear Stearns](https://www.investopedia.com/terms/b/bear-stearns.asp) collapsed in March 2008. Things came to a head later that year with [Lehman Brothers'](https://www.investopedia.com/terms/l/lehman-brothers.asp) bankruptcy, the country’s fourth-largest investment bank, in September 2008. The contagion quickly spread globally, most notably in Europe. As a result of the Great Recession, the U.S. alone lost more than 8.7 million jobs, according to the U.S. Bureau of Labor Statistics. This doubled the unemployment rate. American households lost roughly \$18 trillion in [net worth](https://www.investopedia.com/terms/n/networth.asp) as the stock market plunged. The Great Recession officially ended in June 2009. ### Important The 2010 Dodd-Frank Act gave the government control of failing financial institutions and the ability to establish consumer protections against predatory lending. ## Response to the Great Recession The aggressive monetary policies that the Fed took, along with other central banks around the world, were widely credited with preventing even greater damage to the global economy. However, some also criticized the moves, claiming they made the recession last longer and laid the groundwork for later recessions. ### Monetary and Fiscal Policy The Fed lowered a key interest rate to nearly zero to promote [liquidity](https://www.investopedia.com/terms/l/liquidity.asp). In an unprecedented move, it also provided banks with trillions of emergency loans in a policy known as [quantitative easing (QE)](https://www.investopedia.com/terms/q/quantitative-easing.asp). Some estimates have the figures at a low \$1.2 trillion, others at \$7.7 trillion, and the highest estimate is \$29 trillion. Along with increasing liquidity, the U.S. federal government stimulated the economy by spending \$787 billion under the [American Recovery and Reinvestment Act (ARRA)](https://www.investopedia.com/terms/a/american-recovery-and-reinvestment-act.asp). This figure was later raised to \$831 billion. These monetary and fiscal policies reduced immediate losses to major financial institutions and large corporations. ### The Dodd-Frank Act Not only did the government introduce stimulus packages, but it also established new financial regulation. In the 1990s, the U.S. repealed the [Glass-Steagall Act](https://www.investopedia.com/articles/03/071603.asp), a Depression-era regulation that separated investment from retail banking to reduce systemic risk. Some economists say this helped cause the crisis. The repeal allowed some large U.S. banks to merge and form larger institutions, many of which later failed and had to be [bailed out](https://www.investopedia.com/terms/t/too-big-to-fail.asp#toc-financial-institutions). In response, in 2010, the U.S. Congress passed, and then-President Barack Obama signed, the [Dodd-Frank Act](https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp). This gave the government expanded power to regulate the financial sector, including greater control over financial institutions that were close to failing. It also created consumer protections against predatory lending. However, critics of the Dodd-Frank Act note that the financial sector players and institutions that actively drove and profited from predatory lending and related practices during the housing and financial bubbles were also deeply involved in both the drafting of the new law and in the agencies charged with its implementation. ### Fast Fact The U.S. federal government spent \$831 billion (originally \$787 billion) to stimulate the economy during the Great Recession under the American Recovery and Reinvestment Act. ## Recovery From the Great Recession Following these policies, the economy gradually recovered. [Real GDP](https://www.investopedia.com/terms/r/realgdp.asp) bottomed out in the second quarter of 2009 and regained its pre-recession peak in the third quarter of 2010, about two and a half years after the initial onset of the official recession. Financial markets recovered as the flood of liquidity washed over Wall Street. The [Dow Jones Industrial Average (DJIA)](https://www.investopedia.com/terms/d/djia.asp), which lost over half its value from its August 2007 peak, began to recover in March 2009 and broke its 2007 high in March 2013. For workers and households, the picture was less rosy. Unemployment was at 5% at the end of 2007, reached a high of 10% in October 2009, and did not recover to 5% until 2015, nearly eight years after the beginning of the recession. Real median household income didn't recover to pre-recession levels until 2016. Critics of the policy response and how it shaped the recovery argue that the tidal wave of liquidity and deficit spending propped up politically connected financial institutions and big business at the expense of ordinary people. It also may have delayed recovery by tying up economic resources in industries and activities that deserved to fail, when those assets and resources could have been used by other businesses to expand and create jobs. ## How Long Did the Great Recession Last? According to official Federal Reserve data, the Great Recession lasted 18 months, from December 2007 through June 2009. ## Have There Been Recessions Since the Great Recession? Yes, there was a recession from February 2020 to April 2020. It was the shortest recession on record. ## How Much Did the Stock Market Crash During the Great Recession? On Oct. 9, 2007, the Dow Jones closed at its pre-recession high of 14,164.53. By March 5, 2009, the index had fallen more than 50% to 6,594.44. On Sept. 29, 2008, the Dow fell nearly 778 points in one day. It was the largest point drop in history until the market crashed in March 2020 during the COVID-19 pandemic. ## The Bottom Line The Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive [mortgage lending](https://www.investopedia.com/the-best-mortgage-lenders-11714101) to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors. Low interest rates and poor regulatory oversight following the repeal of the Glass-Steagall Act compounded the problem, as credit was cheap and lending institutions had been freed from regulations that would have hampered their ability to mix commercial and investment banking, which Glass-Steagall had separated. As the economy imploded and financial institutions failed, the U.S. government launched a massive bailout program, which included assistance for consumers and the many unemployed people via the \$787 billion American Recovery and Reinvestment Act (ARRA). (It was later increased to \$831 billion.) Most credit the bailouts and the ARRA with providing much-needed relief to the public and with saving the financial industry (along with other industries) from total failure. However, some assert the money used to bail out insolvent institutions could have been directed to more productive enterprises rather than using it to save failed ones.
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