2008 Economic Crisis - World Events

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USA Headlines and Facts:

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• Lehman Brothers Collapse: On September 15, 2008, Lehman Brothers filed for bankruptcy with $619 billion in debt, the largest in U.S. history, triggering a global market panic. Source: Federal Reserve Bank of St. Louis, https://www.stlouisfed.org/publications/regional-economist/october-2008/lehman-brothers-collapse.

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• Stock Market Plunge: The Dow Jones Industrial Average fell 53% from October 2007 to March 2009, wiping out nearly $8 trillion in stock value. Source: Congressional Research Service, https://crsreports.congress.gov/product/pdf/R/R40183.

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• Household Wealth Devastated: One in four U.S. households lost 75% or more of their net worth, with total wealth losses estimated at $9.8 trillion as home values and retirement accounts crashed. Source: U.S. Federal Reserve, https://www.federalreserve.gov/releases/z1/20090312/.

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• Bank Failures and Bailouts: Major institutions like Bear Stearns and AIG faced collapse; the government bailed out AIG with $85 billion and seized Fannie Mae and Freddie Mac, which backed $5.2 trillion in mortgages. No depositor in FDIC-insured banks lost savings, but banks like IndyMac and Washington Mutual failed. Source: FDIC, https://www.fdic.gov/resources/publications/failed-bank-list/.

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• Foreclosure Crisis: About 3.8 million Americans lost homes to foreclosures as subprime mortgage defaults soared, with home prices dropping over 20% nationwide by 2011. Source: CoreLogic, https://www.corelogic.com/intelligence/foreclosure-reports/.

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UK Headlines and Facts:

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• Northern Rock Run: In September 2007, Northern Rock faced the first UK bank run in over a century, with depositors queuing to withdraw savings; the government nationalized it in 2008, guaranteeing deposits. Source: UK Parliament, https://publications.parliament.uk/pa/cm200708/cmselect/cmtreasy/56/56i.pdf.

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• HBOS Rescue: HBOS, the UK’s biggest mortgage lender, was saved by a Lloyds takeover in September 2008, brokered by the government to prevent collapse amid fears of a savers’ panic. Source: BBC News, https://www.bbc.co.uk/news/business-15551067.

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• RBS and Banking Losses: Royal Bank of Scotland (RBS) required a £45.5 billion bailout, part of a £137 billion UK bank rescue package; taxpayers faced a £35.5 billion loss on RBS alone by 2021. Source: National Audit Office, https://www.nao.org.uk/report/the-costs-of-the-2007-2009-financial-crisis/.

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• Savings Hit Hard: Savers saw interest rates plummet from 6.5% in 2008 to 1.4% by 2018, eroding returns; £10,000 in savings grew to only £8,790 in real terms over a decade after inflation. Source: Bank of England, https://www.bankofengland.co.uk/statistics/interest-rates.

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• Market Tumble: The FTSE 100 dropped 10% in four days after Lehman’s fall, losing nearly a quarter of its value by Christmas 2008, hitting pensions and investments. Source: London Stock Exchange, https://www.lseg.com/markets-products-and-services/our-markets/london-stock-exchange.

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Notable Global Events:

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• Iceland’s Banking Collapse: In October 2008, Iceland’s three major banks—Kaupthing, Landsbanki, and Glitnir—failed, holding debts 10 times Iceland’s GDP. Citizens lost savings, pensions plummeted, and the government seized the banks, with losses estimated at $100 billion for a nation of 320,000. Source: International Monetary Fund, https://www.imf.org/external/pubs/ft/scr/2008/cr08362.pdf.

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• Ireland’s Bank Guarantee Crisis: In September 2008, Ireland’s government guaranteed all deposits and debts of its six major banks to prevent collapse, committing €440 billion—over twice its GDP. Anglo Irish Bank alone cost taxpayers €30 billion after nationalization, and property prices crashed 50% by 2012. Source: Central Bank of Ireland, https://www.centralbank.ie/docs/default-source/publications/financial-stability-reports/fsr-2010.pdf.

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• Greece’s Debt Spiral Begins: By late 2008, Greece’s reliance on cheap credit unraveled as markets panicked post-Lehman. Its budget deficit hit 12.7% of GDP, sparking fears of default and setting the stage for a 2010 bailout, with Greek household wealth dropping 20% by 2011. Source: Eurostat, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Government_finance_statistics.

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