2008-2012 global financial crisis

The financial crisis of 2007–2008, also known as the global financial crisis and the 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s.

It began in 2007 with a crisis in the subprime mortgage market in the US, and developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008. Excessive risk-taking by banks such as Lehman Brothers helped to magnify the financial impact globally. Massive bail-outs of financial institutions and other palliative monetary and fiscal policies were employed to prevent a possible collapse of the world financial system. The crisis was nonetheless followed by a global economic downturn, the Great Recession. The European debt crisis, a crisis in the banking system of the European countries using the euro, followed later.

The Dodd–Frank Act was enacted in the US in the aftermath of the crisis to "promote the financial stability of the United States". The Basel III capital and liquidity standards were adopted by countries around the world.

The precipitating factor was a high default rate in the United States subprime home mortgage sector. The expansion of this sector was encouraged by the following factors.

The accumulation and subsequent high default rate of these subprime mortgages led to the financial crisis and the consequent damage to the world economy.

High mortgage approval rates led to a large pool of homebuyers, which drove up housing prices. This appreciation in value led large numbers of homeowners (subprime or not) to borrow against their homes as an apparent windfall. This "bubble" would be burst by a rising single-family residential mortgages delinquency rate beginning in August 2006 and peaking in the first quarter, 2010.

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