An American History

1132 ★ CHAPTER 28 A New Century and New Crises

the assets and income to qualify for

more traditional, lower- cost loans. As

a result, foreclosures were highest in

minority areas, and the gains blacks,

Asians, and Hispanics had made in

home ownership between 1995 and

2004 now eroded. In 2012, Wells Fargo

Bank, the nation’s largest home mort-

gage lender, agreed to pay $175 mil-

lion to settle claims that its brokers

had charged higher fees to blacks and

Hispanics who borrowed money to

purchase homes during the housing

bubble than to whites with compara-

ble incomes, and pushed the minori-

ties into risky subprime mortgages.

“A Conspiracy against the

Public”

In The Wealth of Nations (1776), Adam

Smith wrote: “People of the same

trade seldom meet together, even for

merriment and diversion, but the

conversation ends in a conspiracy against the public.” This certainly seemed

an apt description of the behavior of leading bankers and investment houses

whose greed helped to bring down the American economy. Like the scandals

of the 1920s and 1990s, those of the Bush era damaged confidence in the eth-

ics of corporate leaders. Indeed, striking parallels existed between these three

decades— the get- rich- quick ethos, the close connection between business and

government, the passion for deregulation, and widespread corruption.

Damaged by revelations of corporate misdeeds, the reputation of stockbro-

kers and bankers fell to lows last seen during the Great Depression. One poll

showed that of various social groups, bankers ranked third from the bottom in

public esteem— just above prostitutes and convicted felons. Resentment was

fueled by the fact that Wall Street had long since abandoned the idea that pay

should be linked to results. By the end of 2008, the worst year for the stock

market since the Depression, Wall Street firms had fired 240,000 employees.

But they also paid out $20 billion in bonuses to top executives. Even the exec-

utives of Lehman Brothers, a company that went bankrupt (and, it later turned

out, had shortchanged New York City by hundreds of millions of dollars in

These graphs offer a vivid visual illustration of
the steep decline in the American economy in
2008 and the first part of 2009, and the slow
recovery to 2012.

FIGURE 28.1 PORTRAIT

OF A RECESSION

200

150

100

50

200120032005200720092011

250

FLA.

U.S.

$300 thousands