Economic abyss may go deep and long
Then came Bear Stearns. One of the five largest U.S. investment banks nearly collapsed in a single day before the government propped it up by backing emergency loans and a rival stepped in to buy it for a paltry $2 per share.
To the drumbeat of signs that seemed to foretell a traditional recession, this added a nightmarish specter — an old-style run on the bank, customers clamoring to pull their cash, a stately Wall Street firm brought to its knees.
The combination has forced the economy to the forefront of the national conversation in a way it has not been since the go-go 1990s, and for entirely opposite reasons.
As economists and Wall Street types grope for historical perspective — which is another way of saying a road map out of this mess — Americans are nervously wondering about retirement savings, interest rates, jobs that had seemed safe.
They are surveying the economic landscape and asking: Just how bad is it?
And the scariest part of all? No one can say for sure.
Squeezing all sides
Even before the crippling of Bear Stearns, the U.S. economy was acting as a slowly tightening vise — an interconnected web of factors combining to squeeze Americans from all sides.
Take Jaci Rae of Salinas, Calif. She runs a company, Luco Sport, that sells golf bags and accessories. The merchandise is made with foam, which is based on petroleum, so record oil prices have taken a heavy toll.
On the other end, her clients are feeling the pinch, too, and cutting back. Sales to retail clients are an eighth of what they were a year ago. So Rae had to cut five of her 20 employees loose.
Now the company isn't buying products as far in advance. With gas prices running high, she waits for shipping companies to pick up products from her headquarters instead of having an employee drop them off.
She is nickel-and-diming expenses at home, too. She eats in every night, has stopped going on road trips to visit her family, dropped her satellite dish and canceled her monthly Blockbuster movie rental.
"I want to make sure I have enough money to feed my family," Rae says.
On top of an economy that was already groaning under the weight of a downturn, Bear Stearns came down like an anvil.
It tied together so much of what's wrong with today's economy — the housing crash, the credit crunch and a loss of confidence among investors and consumers alike.
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