5 Misconceptions about the financial crisis and its aftermath It's hard to believe but it's been five years since the U.S. financial system's problems surfaced, and we're still not even remotely close to being able to feel good about the economy. My admittedly arbitrary start date is June 12, 2007, the day the Wall Street Journal reported that two Bear Stearns hedge funds that owned mortgage securities were in big trouble. At the time, things didn't seem all that grim - in fact, U.S. stocks hit an all-time high four months later. But in retrospect the travails of the funds, which collapsed within weeks, were a tip-off that a crisis was afoot. Problems kept erupting, efforts to restore calm failed, and we trembled on the brink of a financial abyss in 2008-09. Things have gotten better since then, but still aren't close to being right. There's a long way to go before the economy, and people, recover from wounds inflicted by the financial meltdown. The value of homeowners" equity - most Americans" biggest single financial asset - is down $4.7 trillion, about 41 percent, since June 2007, according to the Federal Reserve. The U.S. stock market has lost $1.9 trillion of value, by Wilshire Associates" count. Even worse, we've got fewer people working now - 142.3 million - than then (146.1 million), even though the working-age population has grown. So while plenty of folks are doing well and entire industries have recovered, people on average are worse off than they were. Bad stuff. How should you think about the past five years? What can we learn from them? And what can we as a society do to minimize the chances of a recurrence? I've been writing about the financial meltdown and its aftermath almost continually since I joined Fortune the month after the symptoms surfaced. Now, five years into the problem, I find myself getting increasingly angry and frustrated watching myth supplant reality about what happened, and seeing fantasy displace common sense when it comes to fixing the problems that got us in this mess. So let's set the record straight about a few misconceptions. Ready? Okay, here we go. Misconception No. 1: The government should have done nothing. There's an idea gaining currency that everything the government did, from the Troubled Assets Relief Program (the now infamous TARP) to the Federal Reserve's innovative lending programs and rate cutting, just made the problem worse. And that we should have simply let markets do their thing. Wrong! During the dark days of 2008-09, when giant institutions like Washington Mutual and Wachovia and Lehman Brothers failed and the likes of Citigroup, Bank of America, AIG, GE Capital, Merrill Lynch, Morgan Stanley, Goldman Sachs and huge European banks were near collapse, letting them all go under would have brought on the financial apocalypse. We could well have ended up with a downturn worse than the Great Depression, which was the previous time that failures in the financial system (rather than the Federal Reserve raising rates) begat a U.S. economic slowdown.