2008 Global Financial Crisis (GFC)
What It Is
The 2008 GFC was the most severe financial crisis since the Great Depression, triggered by subprime mortgages, excessive leverage, and interconnected financial institutions.
Why It Matters
It reshaped global banking, regulation, and monetary policy for decades.
How It Happened
- Subprime mortgage boom
- Securitization and CDOs
- Excessive leverage at major banks
- Housing bubble collapse
- Liquidity freeze in global markets
Key Components
- Mortgage‑backed securities
- Shadow banking system
- Credit default swaps
- Systemic risk
Example
Lehman Brothers’ bankruptcy triggered global panic and a freeze in interbank lending.
Key Takeaways
- Systemic risk can spread rapidly.
- Leverage amplifies losses.
- Central banks now use QE and emergency facilities to prevent collapse.