The financial 2008 crisis is the world’s most serious economic crisis in modern history. It is the worst since the Great Depression. It affected all parts of the world and affected the world’s economy. Although the financial crisis has many causes, the most common is the collapse of the housing market. As a result of this collapse, many countries have suffered massive losses.
The financial 08 crisis began in the early 2006 when home prices began to fall. Subprime mortgage lending companies began to fail, which caused a strain on global financial markets. By December of that year, the US economy entered a recession. Several large financial firms were forced to file for bankruptcy. This caused panic in the market, which in turn frozen the global lending system.
The failure of Lehman Brothers triggered an extreme financial crisis. As a result, investors pulled their money from investment funds and banks around the world. They were uncertain which financial firm was next to fail and whether they were too exposed to subprime mortgages. The global banking system became severely short of funds. In response, the stock market plunged. The Dow Jones Industrial Index fell more than 3,600 points in a single day. Meanwhile, the Federal Deposit Insurance Corporation (FDIC) seized Washington Mutual and Merrill Lynch, resulting in a global financial meltdown.
In addition to mortgage-backed securities, the financial 08 crisis also caused massive losses for the investment bank Bear Stearns. These losses resulted in Bear Stearns losing its ability to borrow money. It subsequently sold itself to JP. Morgan Chase for $10 per share in March 2008 to avoid bankruptcy.
The crisis led to major reforms in banking and financial regulation. Moreover, it prompted Congress to pass legislation affecting the Federal Reserve. The financial crisis also led to the formation of the Financial Stability Oversight Council (FSOC), which monitors systemic risks. The Federal Home Loan Bank Board (FHLB) also imposed new processes and tools to help shut down failed financial institutions.
The financial 08 crisis impacted the financial systems of developed and emerging economies. Although the financial system recovered from this crisis, it is still fragile. The financial system remains indebted and highly interconnected. This means that a financial crisis similar to 2008 could still occur. This would require widespread public intervention to save the financial system.
Greece’s financial situation was particularly dreadful. By the middle of 2009, Greece had reached insolvency. It was suffering from a budget deficit of 13 percent and its bond yields were sky-high. It was clear that the Greek government needed a restructure of its debt. But many voters in the eurozone were not in favor of such a drastic action.
The global financial crisis has highlighted weaknesses in the supervision and regulation of financial institutions. There are four main areas for reform.