It’s official: the average household took a battering during the recession.
Numbers released by the Federal Reserve earlier this week made clear the impact of the financial crisis, which rocked Wall Street and the housing market in recent years. The figures compared a household in 2007 — right as the house marketing started to falter — to that same household in 2010.
During that stretch, the average family saw its net worth fall from $126,400 to $77,300, a 38 percent drop. Much of that decline can be attributed to the value of the family’s home, generally its single largest investment. But the problem went beyond real estate. Family income also fell in those same years, from $49,600 to $45,800.
In all likelihood, you’re worth less today than you were in 2007. Well, take heart. You’re not alone. And in some ways, by comparison’s sake, you’re not looking so bad right now.
Take JPMorgan Chase and Co., the largest bank in the United States. It also made some poor investments, only its risk-taking happened a lot more recently than 2007.
CEO Jamie Dimon spent Wednesday morning in front of Congress, testifying on a $2 billion loss caused by risky trades. Dimon, who was greeted by heckles of “crook” at the public hearing, has been under fire for the loss, which he originally dismissed as a “tempest in a teapot.”
He conceded Wednesday he was “dead wrong” on that point. The bank’s market value has fallen by more than $25 billion since news of the risky trades went public.
It doesn’t take a genius to see that this investing stuff is tricky business. You can’t do it. Wall Street can’t do it. And geniuses can’t do it — or at least the people who pick geniuses.
In another sign of the times, the Nobel Foundation announced this week it will slash its prize money by 21 percent because of, yes, more bad investments, according to the New York Times. Now, instead of a Nobel Prize winner taking home $1.4 million for discovering a new vaccine, that brilliant mind gets $1.1 million. The cutback will help preserve the foundation’s long-term financial health.
In general, this is what a down economy looks like. Skittish investors. Tanking stock prices. Genuises that don’t look so smart. And you.
Again, you could be looking worse.
Maybe you had to rework your household budget, but at least your bad decisions didn’t require a Congressional hearing. Maybe you lost your job, but Boeing hasn’t stopped hiring – you’ll find another. Maybe you are even struggling to keep your home, but unlike Dimon, you still have your dignity.