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5 lessons of the Great Recession

Five years after the worst crisis since the 1930s, America has devised safeguards and changed the rules of Wall Street. But could the country really avoid another financial collapse?

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The economy, despite massive revival efforts, is growing only tepidly – a problem due in part to lingering effects of the crisis. For example:

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•One out of 5 mortgage borrowers today remains "under water," with loan balances larger than the home's market value.

•Unemployment in the US still hovers at a stubbornly high 7.4 percent – significantly higher at this stage than in any other economic recovery since World War II.

••Four years after the recession's official end, the Fed continues to hold short-term interest rates near zero percent in a bid to revive the economy – a remedy unprecedented in length and magnitude in Fed history.

Such circumstances help explain why, in a new Christian Science Monitor/TIPP poll, 36 percent of Americans say the financial crisis has made the economy permanently weaker. Some 49 percent say the crisis weakened the economy, but that the problems will ultimately fade. Only 11 percent say the economy has already regained the ground lost during the crisis.

The past five years have hardly been all gloomy. The economy has improved, many debt-laden families and firms have cleaned up their books, and both corporations and regulators alike have taken major steps to make the financial system safer for the future.

Yet the task is far from finished. The Dodd-Frank Wall Street Reform and Consumer Protection Act – Congress's major response to the crisis, passed in 2010 – is only starting to be implemented. By one tally, federal agencies have completed less than half of some 398 required rulemakings under that law.

What did the country learn from the crisis? Could a similar collapse happen again? Here are five take-aways from a Great Recession that has indelibly affected a generation, in America and around the world.

1. A HOUSE ISN'T AN ATM.

With his trademark blend of humor and social criticism, Charles Dickens once described credit as a system in which "a person who can't pay, gets another person who can't pay, to guarantee that he can pay."

This ethos got pushed to its limit in the housing market in the early 2000s. Credit was extended far beyond prudent standards, resulting in a boom-and-bust cycle that, in turn, helped trigger a wider crisis. In the process, the credit bubble symbolized a broader lesson that history teaches again and again: The very financial system that helps to fuel growth in good times is also a source of big risk to the wider economy.

The housing market became a realm of now-familiar abuses: Low "teaser" interest rates that would jump sharply after a few years. Loans with no down payment. Mortgages with "negative amortization," in which the balance due on the home would rise over time rather than fall, allowing borrowers to pay less in early years. It all seemed OK because home prices were going to keep rising inexorably.

Fueling this excess at the consumer level was excess in high finance. Home loans were packaged into securities that investors snapped up for their seemingly safe returns – with blithe approval from rating firms like Moody's and Standard & Poor's.

All the while, economists marveled at the moderate but sustained growth of the economy, a seemingly golden era of stability. A period of intense financial innovation was perceived as more than just an economic boon. It represented the next phase of evolution for a capitalist society – a sort of postindustrial Shangri-La.

"We grew up believing that finance was the next level of capitalism," Mohamed El-Erian, who heads the investment firm PIMCO, said at a recent panel discussion in Washington. The idea was that "somehow you go through agriculture and manufacturing, and then you go into services, and then if you're really lucky, you get to finance."

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