2008 financial crisis

The 2008 financial crisis was the most severe economic crisis since the Great Depression. On 15 September 2008 the US investment bank Lehman Brothers filed for bankruptcy – and the world held its breath.

How it came about:

1. US banks issued huge numbers of mortgages to people who couldn't repay them ("subprime")
2. These loans were packaged into complex securities and sold worldwide
3. When the housing bubble burst, the securities became worthless
4. Banks worldwide had lost billions on them – panic broke out

The consequences for Germany: GDP fell by 5.7% in 2009 (the worst slump since the war). The DAX fell from 8,000 to 3,600 points. Short-time work saved millions of jobs. The government supported banks with over 400 billion euros.

The lesson: too much debt + too little regulation + greed = disaster. Since then banks have been more strictly regulated (Basel III).