GLOBAL FINANCIAL CRISIS- A SPECIAL

The "Global Financial Crisis" of 2008, also called as global financial meltdown, global financial turmoil mainly resulted from the subprime mortgage crisis of 2007.

Subprime lending crisis, which began in the United States has become a financial contagion and has led to a restriction on the availability of credit in world financial markets. Hundreds of thousands of borrowers have been forced to default and several major subprime lenders have filed for bankruptcy…. Read more

Initially the companies affected were those directly involved in home construction and mortgage lending such as Northern Rock and Countrywide Financial. Financial institutions which had engaged in the securitization of mortgages such as Bear Stearns then fell prey. On July 11, 2008, the largest mortgage lender in the US collapsed. IndyMac Bank's assets were seized by federal regulators after the mortgage lender succumbed.

Thereafter, US government saved mortgage lenders Fannie Mae and Freddie Mac, by placing the two companies into federal conservatorship on September 7, 2008.

It then began to affect the general availability of credit to non-housing related businesses and to larger financial institutions not directly connected with mortgage lending. Exposure to these mortgage-backed securities, or to the credit derivatives used to insure them against failure, threatened an increasing number of major FIs.

Beginning with bankruptcy of Lehman Brothers on Sunday, September 14, 2008, the financial crisis entered an acute phase marked by failures of prominent American and European banks and efforts by the American and European governments to rescue distressed financial institutions

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