Year 2008: The Great Recession cripples the nationThe greatest financial crisis since the Great Depression hits full force in 2008, spurred by the failure or emergency sale of some of the nation's biggest financial firms, starting with Bear Sterns on March 16, 2008. Wachovia, Lehman Brothers, Washington Mutual and Merrill Lynch later toppled or came to the brink of bankruptcy. The main culprit was toxic subprime mortgages.The Fed and Treasury take unprecedented action to prevent the wholesale collapse of the financial system. When dropping the federal funds rate from 5.25 percent to 1 percent fails to stem the crisis, Fed Chairman Bernanke and Treasury Secretary Henry Paulson turn to more radical methods.
They encourage healthier institutions to buy failing banks, making massive amounts of liquidity available through hastily created government lending programs and arranging takeovers of founding firms. For example, global insurance firm AIG is bailed out with $182 billion.A global panic set off by the failure of Lehman Brothers on Sept. 15 pushes an already slowing economy into the Great Recession. By the fourth quarter 2008, the U.S. economy is shrinking at an annual rate of 6.8 percent. Global gross domestic product growth falls from 3.9 percent a year in 2007 to 1.7 percent a year in 2008.On Dec. 11, former Nasdaq Chairman Bernard Madoff is indicted on charges his multibillion-dollar investment firm is nothing more than a giant Ponzi scheme. In the weeks following, high-profile investors and charities admit to being bilked of billions by Madoff. He is eventually sentenced to 150 years in federal prison.Revolving consumer credit, which includes credit cards and other forms of flexible debt, peaks at nearly $974 billion in August.-- Claes Bell
-- Claes Bell
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