The 2008 Financial Crisis

On September 15, 2008, Lehman Brothers — the fourth-largest investment bank in the United States — filed for bankruptcy, triggering a global financial crisis. The root cause was a housing bubble inflated by subprime mortgages, which had been packaged into complex securities (CDOs) and sold worldwide. When housing prices fell, the securities became worthless, and the banks holding them faced insolvency. The crisis spread with terrifying speed: credit markets froze, stock markets crashed, and governments scrambled to prevent a complete collapse of the financial system. The U.S. government authorized a $700 billion bank bailout (TARP). The Federal Reserve slashed interest rates to zero and began "quantitative easing." Globally, the crisis destroyed an estimated $2 trillion in wealth, threw millions out of work, and triggered the European debt crisis. The phrase "too big to fail" entered the lexicon, and public fury at banker bailouts fueled political movements from Occupy Wall Street to the Tea Party.