The 2008 Financial Crisis Deep Dive
How a housing bubble in America triggered the worst global financial crisis since the Great Depression.
Anatomy of a Crisis
The 2008 financial crisis had its roots in the US housing market. Fueled by low interest rates, relaxed lending standards, and the widespread belief that housing prices could only go up, banks issued millions of subprime mortgages to borrowers who could not afford them. These mortgages were packaged into complex securities (CDOs -- collateralized debt obligations), given AAA ratings by credit agencies, and sold to investors worldwide.
When housing prices began falling in 2006, the entire structure unraveled. Mortgage defaults surged, CDO values collapsed, and financial institutions that held these securities faced massive losses. Lehman Brothers' bankruptcy in September 2008 -- the largest in US history -- triggered a global panic. Credit markets froze, stock markets plunged, and the world economy entered its deepest recession since the 1930s.
