The Great British Bailout - a timeline
The 2008 financial crisis was one of the worst economic disasters since the Great Depression of 1929. Fittingly then, the period following the financial crisis was referred to as the Great Recession, which saw house prices plummeting and a large increase in unemployment.
Here, MoneySuperMarket takes you through the timeline of events as they unfolded.
British bank Northern Rock has borrowed vast sums of money to fund customer mortgages and needs to pay off its debts by reselling these mortgages in the international capital markets. However, the demand for these mortgages is extremely low, leading to the bank facing liquidisation and the need of a loan from the British government. This creates a crisis in public confidence, with customers lining the streets to withdraw their life savings.
Following two failed takeover bids, UK Chancellor Alistair Darling nationalises Northern Rock in a “temporary measure”, though it is nearly four years before it returns to the private sector.
On the other side of the pond, US investment bank Bear Stearns is bought out by JP Morgan and goes down as the biggest casualty of the crisis up to this point, triggering further instability stateside.
The US Government bails out Fannie Mac and Freddie Mac – two massive firms that had guaranteed thousands of financial products known as sub-prime mortgages, which many hold partially accountable for the global financial crash. Over-exposed to the sub-prime mortgage market, iconic American investment bank Lehman Brothers files for bankruptcy, causing financial panic across the world.
The US continues to go on and struggle badly on the stock markets, leading to Goldman Sachs and JP Morgan Chase changing their status to banking holding companies, signifiying the end of the investment banking model popular at the time. Just four days later, American banks Washington Mutual and Wachovia both collapse.
Back on home shores, the UK’s largest mortgage lender, HBOS, is saved by Lloyds TSB after a huge drop in share price and facing the threat of collapse.
After being the first European country to slip into recession, Ireland’s government promises to alter the entire Irish banking system – however, it was unable to live up to this promise as unemployment rose from five per cent to fifteen per cent and property prices dipped by over 50 per cent.
Iceland’s three biggest commercial banks – Glitnir, Kaupthing and Landsbanksi collapse. To protect the deposits of their many British customers, UK Prime Minister Gordon Brown controversially uses anti-terror legislation to freeze the assets of the banks’ UK subsidiaries.
During the worst ever week for the Dow Jones, eight central banks (including the Bank of England, European Central Bank and Federal Reserve) cut their interest rates by 0.5 per cent in an attempt to ease the pressure on borrrowers.
Finally, to avert the collapse of the entire UK banking sector, the government makes the decision to bail out several high-profile banks, including the Royal Bank of Scotland, Lloyds TSB and HBOS.
In the aftermath of the crisis, shocking figures reveal that almost a quarter of a million Americans lost their jobs in October 2008 – just one month. The G20 world leaders subsequently meet for the first time since the start of the crisis.
Several months later, the G20 agrees on a global stimulus package worth $5 trillion.
A new government is elected in Greece and it is subsequently revealed that the financial problems in the nation were twice as large as previously thought.
Signalling the start of the wider Eurozone crisis, Greece is bailed out for the first time after finance ministers agree on loans totalling €110 billion. This strengthens the austerity programme within the country and sends thousands of angry protestors to the streets.
European ministers agree a financial bailout of Ireland worth €85bn.
The European Central Bank bails out Portugal.
Having failed to rectify things within the country, Greece is bailed out for a second time.
The number of unemployed Europeans reaches its highest level ever.
Without any doubt, the 2008 financial crash had a significant impact on the global economy as a whole and is only partially documented here. With awareness of the events that preceeded us, there is hope that we’ll avoid or be ready for the eventuality of another financial crash.
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