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Net Net: Promoting innovation and managing change

Crisis cost up to $14 trillion, Dallas Fed says

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The financial crisis cost the U.S. economy $6 trillion to $14 trillion—and possibly twice that—along with untold costs from "special treatment" that too-big-to-fail banks received, according to an explosive new analysis from the Dallas Federal Reserve.

Nearing the five-year anniversary of the Lehman Brothers' bankruptcy that shocked the global economy, the central bank analysis takes a stark look at the costs left behind by the crisis and the ensuing bailout.

Among the lasting damages, the paper cites continuing and pervasive unemployment as well as the opportunity costs that came from $12.6 trillion in direct aid given to the financial sector.

"The 2007–09 meltdown produced a huge downshift in the path of economic output, consumption and financial wealth," the paper said. "The nation has borne additional costs arising from psychological consequences, skill atrophy from extended unemployment, a reduced set of economic opportunities and increased government intervention in the economy."