U.S. Still at 'Grave Risk' 4 Years After Lehman Collapse Just in the time for the four-year anniversary of the collapse of Lehman Brothers, a report concludes that the U.S. financial crisis has cost the country $12.8 trillion. Better Markets, a nonprofit organization whose self-described mission is to "promote the public interest in financial reform," estimated the cost of the "Wall-Street caused financial collapse and ongoing economic crisis" using figures from the Congressional Budget Office and Gross Domestic Product estimates from the U.S. Bureau of Economic Analysis. Lehman Brothers, the financial services firm, filed for bankruptcy Sept. 15, 2008, with about $691 billion in assets, the largest bankruptcy in U.S. history. Dennis Kelleher, CEO of Better Markets and co-author of the report, said his organization timed its release with the anniversary to influence lawmakers to focus on tighter regulations. The message isn't to banks. It's to policy makers," Kelleher said. If you look at the economic wreckage and suffering of the American people through the worst economy since the Great Depression, and see that it caused trillions of dollars. The priority has to be preventing this from ever happening again. Kelleher admitted that the $12.8 trillion figure is an estimate and not a comprehensive figure. He makes clear that the report does not insist "there's only one way to do this." "The first thing we did was get our arms around the universe of cost," he said. The authors focused on four categories of cost: unemployment, destroyed household wealth, government bailouts and support, and human suffering. They chose to use the estimated lost Gross Domestic Product from 2008 to 2018, including projections of U.S. GDP before the crisis took place, from the Congressional Budget Office. The estimated lost GDP is $7.6 trillion. The report also estimates "avoided GDP loss" from 2008 to 2012 at $5.2 trillion, saying that figure describes "the estimated additional amount of GDP loss that was prevented only by extraordinary fiscal and monetary policy actions." That figure is based on a model created by economists Alan Blinder and Mark Zandi, of Princeton University and Moody's Analytics, respectively, who wrote the paper "How the Great Recession Was Brought to an End." "You can end up running down rabbit holes like 'Alice in Wonderland' trying to understand," Kelleher said. We wanted to find something robust and real with standard methodology but could also be understood. Kelleher said he agrees "on a theoretical level" that some of the lost GDP is not attributable to the financial crisis. "The problem is there is no data on it," he said. Kelleher said the United States is at "grave risk" of another financial crisis despite the Wall Street financial overhaul implemented by the Dodd-Frank Act. The problem is when you have such a massive crisis like this, it requires passing a law that is equal to the crisis. It just takes time to implement laws," he said. Using a baseball metaphor to describe the status of U.S. financial overhaul, Kelleher said "we're probably in fourth or fifth inning ... because there are so many parts of it." J.D. Foster, a senior fellow at the conservative Heritage Foundation, said any figure to calculate the cost of the financial crisis would be "suggestive but not definitive." "The financial crisis was a global financial crisis," Foster said. It cost a lot of money and hardship in the U.S. and around the world. Because it was a global event, it also had global causes. Foster said putting in place more regulations will not necessarily prevent a future financial crisis and Dodd-Frank would not have prevented the last disaster, nor could it at this point prevent contagion from a future crisis in Europe. "The one thing we know works is requiring financial institutions to hold substantial amounts of capital," Foster said. But the Basel capital requirements, from the global Basel Committee on Banking Supervision, have become too convoluted, even for regulators. "Rather than trying to be sophisticated about risk weighting, just require capital," Foster urged. James Gattuso, a senior fellow in regulatory policy at the Heritage Foundation, said the collapse of Lehman Brothers was one trigger of the recession. "There have been huge economic policy mistakes that have occurred since 2008," Gattuso said. Gattuso said the report fails to fully account for the costs of over-regulation, increased debt and overspending. "To isolate the effects of the banking crisis and the other bad economic policies is essential if you're going to estimate the cost of the banking crisis," he said. Gattuso said the United States needs a "properly functioning bankruptcy system" and a "financial industry that works, where failure is punished and success is rewarded." Kelleher agreed on that point, saying his report's objective was to start a discussion in light of the still-troubled U.S. economy. "There are 23.1 million Americans who cannot find work and 11 million homeowners, almost one in four, saddled with mortgages higher than their homes, so-called underwater mortgages," Kelleher said. "The most important part of financial reform is regulating "too big to fail" banks, so that if they fail, they fail without causing a collapse of the financial system or an economic crisis."