The global financial crisis of 2008: timeline and what changed

1. 2006–2007House prices in the United States stop rising and begin to fall. Defaults on subprime mortgages climb, and specialist lenders start to fail.
2. 9 Aug 2007The French bank BNP Paribas suspends three funds, saying it cannot value their mortgage securities. Lending between banks seizes up and central banks supply emergency cash.
3. 14 Sept 2007The Bank of England gives emergency support to Northern Rock. Depositors queue to withdraw their money, the first run on a British bank in more than a century. The bank is nationalised in February 2008.
4. March 2008The investment bank Bear Stearns runs out of funding and is sold to JPMorgan Chase, with financing from the Federal Reserve Bank of New York.
5. 7 Sept 2008The United States government takes control of Fannie Mae and Freddie Mac, the two companies that stand behind much of the American mortgage market.
6. 15 Sept 2008Lehman Brothers files for bankruptcy, the largest filing in United States history. On the same day Merrill Lynch agrees to be bought by Bank of America.
7. 16 Sept 2008The Federal Reserve lends $85 billion to the insurer AIG. A large money-market fund’s share value falls below one dollar, and investors begin to withdraw from such funds.
8. 29 Sept–3 OctThe House of Representatives rejects the rescue bill on 29 September and the Dow falls 777 points, then its largest one-day points fall. A revised bill creating a $700 billion programme becomes law on 3 October.
9. 8 Oct 2008Six central banks, including the Federal Reserve, the European Central Bank and the Bank of England, cut interest rates together by half a percentage point. The British government announces a plan to put public capital into its banks.
10. 9 March 2009The S&P 500 closes at 676.53, its low, about 57% below its peak of October 2007. By then central banks have cut rates close to zero and begun buying bonds.

• Banks are required to hold more capital and more liquid assets. The international standards known as Basel III were agreed in 2010, and regular stress tests of large banks became routine.
• In the United States the Dodd–Frank Act became law in July 2010. Among much else it moved many derivatives on to central clearing and limited banks’ trading on their own account.
• The Financial Stability Board was set up in 2009 to co-ordinate financial regulation between countries.
• In the United Kingdom the Financial Services Authority was replaced in 2013 by the Financial Conduct Authority and the Prudential Regulation Authority, and the Bank of England was given responsibility for financial stability.
• Central banks cut interest rates close to zero and bought bonds in large quantities, a policy known as quantitative easing. The Bank of England’s rate reached 0.5% in March 2009.

• The losses on the mortgages were large; the damage was far larger, because nobody knew where the losses sat. Uncertainty about who is safe stops lending to everyone.
• A firm financed by overnight borrowing has to be trusted again every day. Bear Stearns and Lehman Brothers did not fail slowly: their funding left within days.
• A high credit rating was a statement about a model’s assumptions. When house prices fell everywhere at once, the assumption failed for all the securities together.
• Things that seemed unconnected fell together, because the same institutions held them and had to sell whatever they could. In a crisis, what is owned by whom matters more than what the assets are.

These are observations about how markets and rules work, drawn from one episode. They are not advice, and they do not say that anything like it will or will not happen again.

It is easy to judge an episode once its ending is known. This exercise takes four moments from the timeline above, one at a time. At each it shows only what had been made public by then, asks a hypothetical question with three plain choices, and then shows what came next and what each choice would have meant.

The text headed “what had been made public by then” is this site’s own summary of the record, written afterwards. It is not a contemporary document and nothing in it is a quotation. The position described is imagined. No choice is marked right, there is no score, and nothing is stored.

A hypothetical for study, not advice. It does not say what anyone should have done then, or what to do now.

The dates and the official actions are a matter of public record. The causes are weighted differently by different inquiries: lending standards, securitisation, credit ratings, bank leverage, regulation, monetary policy and global flows of savings each have their advocates, and the official United States inquiry itself did not reach a unanimous view. Whether Lehman Brothers could or should have been rescued is still argued over. Estimates of the total cost vary widely with what is counted and are not given here.

What caused the 2008 financial crisis?

The immediate cause was a fall in United States house prices, which produced losses on mortgage loans that had been packaged into securities and sold to banks worldwide. Banks held those securities with little capital and short-term funding, so the losses turned into a general loss of trust between banks. Inquiries differ on how to weigh lending standards, ratings, regulation and other factors.

When did Lehman Brothers collapse?

Lehman Brothers filed for bankruptcy on 15 September 2008. It was the largest bankruptcy filing in United States history and marked the most acute phase of the crisis.

What rules changed after the 2008 crisis?

Banks were required to hold more capital and liquid assets under the Basel III standards, large banks face regular stress tests, and many derivatives must now pass through central clearing. The United States passed the Dodd–Frank Act in July 2010, and the United Kingdom replaced its regulator with the Financial Conduct Authority and the Prudential Regulation Authority in 2013.

• Leverage
• Liquidity
• Central Bank
• Monetary Policy
• Recession
• Index

Central bank histories, including the Federal Reserve’s and the Bank of England’s, the report of the United States Financial Crisis Inquiry Commission, and the public record of legislation.

A number is given on this page only where it is famous and certain. Nothing here is a quotation.