what happened in 2008 financial crisis

The 2008 financial crisis was a massive financial and economic collapse that cost many ordinary people their jobs, their life savings, their homes, or all three. The crisis began with cheap credit and lax lending standards that fueled a housing bubble. When the bubble burst, the banks were left holding trillions of dollars worth of near-worthless investments in subprime mortgages. The crisis developed gradually, with home prices beginning to fall in early 2006. In early 2007, subprime lenders began to file for bankruptcy. In June 2007, two big hedge funds failed, weighed down by investments in subprime loans. In August 2007, losses from subprime loan investments caused a panic that froze the global lending system. In September 2008, Lehman Brothers collapsed in the biggest U.S. bankruptcy ever. The decline in overall economic activity was modest at first, but it steepened sharply in the fall of 2008 as stresses in financial markets reached their climax. The crisis rapidly spread into a global economic shock, resulting in several bank failures. Economies worldwide slowed during this period since credit tightened and international trade declined. Housing markets suffered, and unemployment soared, resulting in evictions and foreclosures. Several businesses failed. The crisis was the worst U.S. economic disaster since the Great Depression, with the stock market plummeting, wiping out nearly $8 trillion in value between late 2007 and 2009. Unemployment climbed, peaking at 10 percent in October 2009. Americans lost $9.8 trillion in wealth as their home values plummeted and their retirement accounts vaporized. In all, the Great Recession led to a loss of more than $2 trillion in global economic growth, or a drop of nearly 4 percent, between the pre-recession peak in the second quarter of 2008 and the low hit in the first quarter of 2009.