Americans won't be rushing to put out the blaze the next time Wall Street burns

One year on from the near collapse of the financial system, Tom Leonard in New York finds it's ordinary Americans who are picking up the bill.
The green shoots of recovery are sprouting up through the still stony ground of the US economy. A year ago, such a scenario seemed impossible as the optimists were drowned out under a barrage of Doomsday pronouncements.

The world’s biggest economy was heading for a 1930s-style Great Depression, if not Armageddon. Even the US Treasury Secretary spoke about perhaps not having an economy to save.
New York’s financial district was Ground Zero once more – hit this time by reckless, greedy bankers who appeared to have hijacked the entire economy.

In a city which some said was ruined by the rich, the schadenfreude was brief. Yes, you could suddenly get a table at the best restaurants and a bargain pair of shoes on Madison Avenue, but New York relies heavily on Wall Street taxes for its livelihood and many of its other jobs.

Tales of business suddenly drying up for cab companies and newsagents around the corner from Lehman Brothers’ offices were soon repeated across the US as the shock waves rippled.

Existing economic problems, particularly in the US car industry, suddenly worsened. The once all powerful General Motors had to be bailed out. Unemployment soared and continues to rise.

The housing market, having caused much of the Wall Street collapse in the first place over sub-prime lending, went into freefall in some states. Tent cities sprung up for the dispossessed and lorry convoys toured the country handing out food to the needy . When the government stepped in to bail out the banks, and when car industry chiefs flew to Washington by private jets to beg for money, a backlash against big business was inevitable. Faced with their own personal economic meltdown, many Americans found the idea that some companies and financial institutions were too big to fail hard to stomach.

The talk was about Wall Street versus “Main Street”, which some saw as a clash of values between a brash American get-rich-quick culture and another, older American philosophy that valued hard work and financial prudence.

A year on – and $700bn (£424bn) of government Troubled Asset Relief Programme (TARP) money later – America is not out of the woods, but the nightmare scenarios did not come to pass. Survival has been a heavy price – 4.5m people lost their jobs and unemployment is still growing at the rate of 200,000 people a month. Some fear future generations will have to bear the cost of the bail-out. Unemployment among teenagers out of education now stands at 25pc.

This week, debate is raging over whether anything has changed on Wall Street. Some say banks will never again be able to borrow so much and take such risks, but most observers seem to believe little has changed. The same archaic federal regulatory system is still there, the banks are still too big to fail and the eye-watering bonuses are back.

“History cannot be allowed to repeat itself,” President Barack Obama warned Wall Street on Monday. But some believe the president, now saddled with health reform and other concerns, has missed his chance to impose radical reform on Wall Street.

The panic may be over and there are signs of growth but sceptics argue the banks are still weighed down by toxic assets and not lending as much as they should.

There is a strong sense here that the next time a Lehman threatens to crash and burn, ordinary Americans will not rush to put out the blaze. Confidence in the system has suffered – many have clearly had their cherished notions about the justness of US capitalism trashed. That you don’t have to reap what you sow if you’re a giant bank or car maker has been the most painful lesson the past year.