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On Thursday, we shared with a Yale Law School audience this short passage from our book about the performance of Unemployment Insurance during The Great Recession:

“Between March and November of 2008, one titan of American finance after another—Bear Stearns, Fannie Mae, Freddie Mac, AIG, Lehman Brothers, Merrill Lynch, Countrywide—collapsed outright, fell into government receivership, or was acquired by a competitor at a bargain-basement price. Panic reigned in financial markets. Stock prices swooned. Debt markets seized up. Lending for home mortgages slowed from a torrent to a trickle.

The ravaged firms were not alone in having made large, losing, often inscrutable bets on the American housing market. Other highly regarded financial firms—Morgan Stanley, Goldman Sachs, and Bank of America—gambled in similar ways. But for the Federal Reserve’s role as lender of last resort and the Bush administration’s efforts to prevent a worldwide economic Armageddon, they too would have faced extinction. Had someone a decade earlier produced a novel or movie depicting similar events, critics would have dismissed the work as the worst sort of fear-mongering fantasy.

But this was all too real. The aftershocks rocked the country. Economic activity, as measured by gross domestic product, fell 8.9% in the fourth quarter of 2008. By Barack Obama’s inauguration day in January 2009, 13 million Americans were unemployed.

What went wrong? Bank of America CEO Brian Moynihan located the blame for the debacle: “Over the course of the crisis, we, as an industry, caused a lot of damage. Never has it been clearer how poor business judgments we have made have affected Main Street.”

The Unemployment insurance program took on added significance during the aftermath of the financial collapse. The Stimulus Act extended the traditional period of benefits from 26 to 99 weeks. (Total UI spending in FY 2010 would be $140 billion, almost triple that of 2008.) The Stimulus Act changed the formula used to calculate the level of benefits, which were on average $300 per week. The act put an extra $25 per week into the wallets of the struggling unemployed workers who qualified.

Qualified? One might assume, even hope, that all the Americans who lost jobs during the Great Recession would receive support. But this is simply not true, or anywhere near true. Analysts at the nonpartisan GAO concluded in 2010 that of “the 15 million workers who lost jobs from 2007 to 2009, half received Unemployment Insurance.”

We then examined why the program served so many citizens so poorly: a combination of a “race to the bottom” among states and the changing nature of work from full to part time and W-2 employment to contractual arrangements.  For more on the protections available against the threat of involuntary unemployment, see http://www.sixthreats.com/six-threats.