2008 will be best remembered for the explosive banking crisis that shook the entire world. Three weeks that changed the entire course of the financial history of the world. A financial crisis that left no part of the world untouched. The banking crisis of 2008 has gone down in history as the period of turmoil and collapse in the financial and banking sector. The financial earthquake was so massive that its aftershocks were felt till later.
The year 2008 rolled out with the Lehman Brothers going bankrupt. Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester all came within a whisker of the following suit and had to be rescued. The light touch regulation systems propagated by the western world came crashing down and trillions of dollars were pumped to prevent a total collapse of the banking world.
March 2008 was experiencing early rumblings of an economic meltdown that seemed inevitable. Rising unemployment and plunging house prices were adding to the discontent. The week beginning 9 March till 15 March, the real storm broke out and swept away some of the biggest and most revered names in international finance.
A blind panic set in on the Wall Street and the US Federal Reserve injected $236bn (then, £117bn; now £152bn following the pound’s collapse) into the American banking system. Other central banks followed and Citigroup, the world’s biggest bank, was forced to fork out £1bn to bail out six of its hedge funds. A process that brought Wall Street and the world’s banking system to its knees.
September 2008 saw even more degradation of the banking system, a temporary ban on short-selling of financial stocks to prevent shares falling further was imposed. October 2008 saw many world leaders joining hands to tackle this unforeseen financial disaster. A $200bn war chest to lend to governments driven to the financial crisis by the crunch, and make cash available to struggling countries within a fortnight was formulated by the IMF chief Dominique Strauss-Kahn.
The banking crisis 2008 was a wakeup call for many leaders and countries who as a result formulated economic policies to be prepared to handle any similar situation.