The first thing they looked at was to cut costs. By cutting costs, they had created more unemployment which brings a tumbling down effect. Before internet bubble burst, people were buying everything on credit and the expected worth of their stock portfolio. But once their portfolio was reduced to almost nothing, they could no longer pay for those things which had caused the amount of money people spend into the economy to decrease. Thus when affecting the consumer they were almost affecting the backbone of the economy. The money that people spent was the main fuel for the bullish economy. Without people spending, a recession had sure happened. .
The worst of all were the people who have 401k with the companies that went bankrupted and an example would be Enron. The people who had 401k with Enron were practically left with nothing because they were the last people to get into the liquidation of the Enron assets, which means they were left with nothing but unemployed. It would be difficult for them to find a job because the companies around their area were trying to cut down everything to accommodate the effects of the economic downturn. .
Many of those companies that went bankrupted could no longer pay what they had to owe. So, the financial institutions that had lent them money from the past would be the first ones in line to collect what they had lent out. But not all financial institutions could collect all that they had lent out. So, those financial institutions had to take those as a bad credit expense and write it off. Also, with the devaluation of the US dollar, many foreign direct investments had been transfer out of the US. The devaluation was caused by the instability of the US economy and could affect many different countries that rely on a strong US currency. Japan relies on a strong US currency so that they can export more to the US. .
Since the downturn of the economy exists, the stock market hasn't been doing to well and this has affects many institutions that primarily make money from stock transactions and investments in the stock market.
