RENEE MONTAGNE, Host:
NPR's Jim Zarroli looks back at the year's economic news.
JIM ZARROLI: There was the conference call last summer when Angelo Mozilo, chairman of the mortgage giant Countrywide Financial, had to explain to nervous shareholders just how bad the business climate had gotten.
ANGELO MOZILO: As I try to walk through what happened here, and could a lot of this have been foreseen, and should we have known, could we have seen it? But as I do reflect on it, and I do a lot, that nobody saw this coming.
ZARROLI: Or perhaps it was that October morning when Merrill Lynch CEO, Stan O'Neal, days before losing his job, had to tell analysts that the company's subprime losses were $3 billion higher than he first thought.
STAN O: I'm not going to talk around the fact that there were some mistakes that were made. We - I - am accountable for those mistakes, just as I am accountable for the performance of the firm overall.
ZARROLI: Even worse, some of the titans of Wall Street, like Citigroup's Charles Prince, seemed to be in the dark about the extent of their firm's subprime investments. Sam Stovall, the chief investment strategist at Standard and Poor's, says that made a lot of investors nervous.
SAM STOVALL: When we find out that Stanley O'Neal or that Chuck Prince didn't even know how much was in their own companies, those people outside of those companies certainly do not have a better feel.
ZARROLI: 2007 saw a big tightening of lending standards for consumers and businesses. Economist Rich Yamarone of Argus Research.
RICHARD YAMARONE: What we have now is a crisis of confidence that borrowers and lenders do not want to lend to each other because they don't know what they have on their balance sheets.
ZARROLI: Yamarone says that's a potential problem because if companies can't borrow, business activity grinds to a halt. But Yamarone says the remarkable thing is that with all of these problems, the U.S. economy has still fared pretty well this year. The economy grew by a healthy 4.9 percent between July and October. The stock market has largely recovered, thanks in no small part to the Federal Reserve's decision to cut interest rates four times, and it will end the year in positive territory. Unemployment is still low, and Yamarone says even consumers are still spending.
YAMARONE: The R-word that we should be thinking of here is not recession, it's resiliency. And everyone seems to forget about how strong and resilient the American consumer is.
ZARROLI: Sam Stovall of Standard and Poor's has his own way of answering that question.
STOVALL: Actually, if you wanted to think of a good way of remembering the five things that are likely to affect the markets going into 2008, it's the "Old MacDonald" song of E-I-E-I-O.
ZARROLI: Jim Zarroli, NPR News, New York.
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