507 banks failed in the United States 2008-2014 inclusive, costing the Deposit Insurance Fund nearly $90 billion. Many millions of homes went into completed foreclosure.
... All 22 banks tested this year would have remained solvent and above the
minimum thresholds to continue to operate, the Fed said, despite
absorbing roughly $550 billion in theoretical losses. ...
Under this year’s hypothetical scenario, a major global recession would
have caused a 30% decline in commercial real estate prices and a 33%
decline in housing prices. The unemployment rate would rise to 10% and
stock prices would fall 50%. In 2024, the hypothetical scenario was a
40% decline in commercial real estate prices, a 55% decline in stock
prices and a 36% decline in housing prices. ...
The 2024 benchmarks are a mixture.
The 2007 shock to the median price of houses sold was only 19% 1Q2007-1Q2009, with prices not recovering until 1Q2013. But since the median price of houses sold has jumped by about 31% just since 2020, planning for a future 36% decline is more than appropriate.
Unemployment
peaked at 10% in October 2009. The civilian employment level contracted
by almost 7 million 2007-2010 on an average basis, and did not recover
until 2014, seven long years later. Pandemic unemployment peaked at 14.8% in April 2020. We got as high as 10.8% in November and December 1982. Great Depression unemployment peaked at 25.59% in May 1933. This one is a crap-shoot.
The average price of the S&P 500 fell 50.8% between October 2007 and March 2009, but in 2007 the S&P 500 was valued about 26% above the long term mean, not 130% as in 2024.
That's the datum that worries me. Just to get to its historical median value of 81, the S&P 500 today would have to fall 61%, to about 2425.
Imagine the howls.
