What was the financial crisis of 2007-2008?

The 2007-2008 financial crisis was a severe worldwide economic disruption triggered by the bursting of the United States housing bubble and the collapse of subprime mortgage-backed securities. Falling housing prices led to widespread defaults, a global liquidity crunch, and the historic bankruptcy of Lehman Brothers in September 2008. Governments responded with massive financial bailouts, monetary policy shifts like quantitative easing, and sweeping regulatory reforms such as the Dodd-Frank Act.

What we know

• The crisis began with the subprime mortgage crisis in early 2007 as mortgage-backed securities and related derivatives collapsed in value. [2]
• Lehman Brothers filed for bankruptcy in September 2008, triggering stock market crashes and bank runs globally. [2]
• U.S. household net worth declined by nearly $13 trillion, and the U.S. economy lost nearly 9 million jobs during 2008 and 2009. [3]
• Governments and central banks deployed massive interventions, including the Troubled Asset Relief Program and quantitative easing, to stabilize financial systems. [2, 3]

Still open

• Commentators assign varying levels of blame to financial institutions, regulators, credit rating agencies, government housing policies, and consumers.

Where to go next

• how it workedHow did the subprime mortgage market collapse?
• a case in pointWhy did Lehman Brothers fail?
• what followedWhat caused the Great Recession?
• the bigger pictureWhat is a financial crisis?
• whenHow did the Dodd-Frank Act change banking regulations?
• an unexpected connectionHow did a 17th-century flower bubble relate to modern banking panics?Both events illustrate how financial assets can suddenly lose nominal value during a market bubble, highlighting that speculative manias span centuries.

Sources

• [1]2007–2008 financial crisis (Wikidata Q896666) · CC0 1.0
• [2]2008 financial crisis · CC BY-SA 4.0
• [3]Subprime mortgage crisis · CC BY-SA 4.0
• [4]Financial crisis · CC BY-SA 4.0
• [5]Causes of the Great Recession · CC BY-SA 4.0