What exactly happened in the 2008 financial crisis?

Mainly caused by the subprime housing credit crisis in the United States. Initially, the affected companies were limited to those directly involved in homebuilding and subprime lending, such as Northern Rock and National Financial Services. Some financial institutions engaged in mortgage securitization, such as Bear Stearns, became victims. On July 11, 2008, the largest mortgage company in the United States collapsed.

IndyMac's assets were seized by federal agents after they were crushed by tight credit, as home prices continued to slide and foreclosure rates rose. Financial markets fell sharply that day as investors wondered whether the government would try to bail out mortgage lenders Fannie Mae and Freddie Mac. On September 7, 2008, it was late summer. Although the federal government took over Fannie Mae and Freddie Mac, the crisis continued to intensify.

The crisis then began to affect general credit that had nothing to do with real estate, and by extension, large financial institutions that were not directly related to mortgage lending. Most of the assets owned by these institutions are derived from income associated with home mortgages. For these securities with credit loans as the main subject matter, or credit derivatives, they were originally used to protect these financial institutions from the risk of bankruptcy.

However, due to the occurrence of the subprime housing credit crisis, the number of members affected by these credit derivatives has increased, including Lehman Brothers, American International Group, Merrill Lynch and HBOS. Other companies have begun to face pressure, including Washington Mutual Bank, the largest deposit and lending company in the United States, and affecting large investment banks Morgan Stanley and Goldman Sachs Securities.

Extended information:

The 2009 global financial crisis, also known as the world financial crisis, subprime mortgage crisis, credit crisis, was also named the financial tsunami and Wall Street tsunami in 2008. It is a financial crisis that began to emerge on August 9, 2007. 6 Since the outbreak of the subprime housing credit crisis, investors have begun to lose confidence in the value of mortgage-backed securities, triggering a liquidity crisis.

Even if the central banks of many countries have repeatedly injected huge amounts of funds into the financial market, they cannot prevent the outbreak of this financial crisis. It was not until September 9, 2008, that the financial crisis began to spiral out of control and resulted in the collapse or government takeover of many fairly large financial institutions.

Global integration has created a fragile and interconnected economy, which appears to be irreversible and very stable on the surface. In other words, it enables catastrophic black swan theories (impossible things) to emerge while people have never lived under the threat of global collapse. Financial institutions continue to consolidate and become a handful of very large banks, almost all of which are interconnected.

So the entire financial system swells into an ecosystem of these huge, interdependent, stacked banks. Once one of them falls, all of them collapse. The increasingly violent consolidation among banks seems to reduce the possibility of a financial crisis. However, once it occurs, the crisis will become global in scale and cause serious damage.

In the past, the diverse ecosystem was composed of many small banks, each with their own lending policies. Now, all financial institutions imitate each other's policies, making the entire environment more and more homogeneous.

Reference: Baidu Encyclopedia-Global Financial Crisis