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28 Locavesting<br />
three <strong>of</strong> those banks did not survive the subprime crisis, while the<br />
remaining two were propped up with taxpayer money.)<br />
It is painfully clear that the actions <strong>of</strong> sophisticated investors<br />
trading among themselves with little oversight can have disastrous<br />
results for the entire global economy. It is also clear that many socalled<br />
sophisticated investors—managers <strong>of</strong> pension funds, state<br />
and city treasuries, and sovereign funds—in fact did not understand<br />
the risks embedded in the opaque securities Wall Street was<br />
pushing. Even the chiefs <strong>of</strong> some <strong>of</strong> the biggest banks claimed<br />
they did not grasp the implications <strong>of</strong> the fi nancial wizardry taking<br />
place within their organizations.<br />
For the most part, though, the fi nancial chiefs and their traders<br />
walked away unscathed, with bonuses intact. Wall Street is back<br />
to record- level pr<strong>of</strong>i ts and pay, while Main Street is still suffering.<br />
Unemployment is stuck in the high single digits, and the ranks <strong>of</strong><br />
the long- term unemployed continue to grow. Some 2.5 million more<br />
Americans were expected to lose their homes in 2010 and 2011.<br />
Between November 2008 and April 2010, about 39 percent <strong>of</strong> households<br />
had either been unemployed, had negative equity in their<br />
house, or had fallen behind on house payments. 17 Many consumers<br />
have seen their credit card interest rates hiked even as their savings<br />
accounts earn less than the cost <strong>of</strong> infl ation. Companies won’t hire<br />
until they see signs <strong>of</strong> a pickup in the economy, but without jobs,<br />
consumers, who make up the biggest piece <strong>of</strong> GDP, are reluctant to<br />
spend. American innovation and entrepreneurship is in peril.<br />
We did not get into this situation overnight. In many ways,<br />
the prosperity <strong>of</strong> the last decade or so was an illusion. The housing<br />
bubble infl ated home prices, which in turn drove consumer<br />
spending, as homeowners used their houses as ATMs by borrowing<br />
against their value. Real wages were down, and job growth,<br />
from a historical standpoint, was atrocious. Between May 1999 and<br />
May 2009, private sector employment rose by 1.1 percent, the lowest<br />
10-year increase since the Depression. 18 But consumer spending<br />
was on a tear.<br />
While we were on our collective debt- fueled bender, the manufacturing<br />
sector—long a pillar <strong>of</strong> the economy and middle class—<br />
continued its long decline as jobs and skills were shipped overseas.