Actions the Fed took in 2007 showed that it gradually recognized the scope of the approaching crisis. That year, the Fed began to cut interest rates and took extraordinary steps to ease credit and shore up confidence in the banking system.
Banks and hedge funds that had invested big in subprime mortgages were left with worthless assets as foreclosures rose. The damage reached the top echelons of Wall Street.
By December, the economy had plunged into the Great Recession, which would last until June 2009. Five years later, the economy has yet to fully recover.