This credit crunch timeline traces the 2007–2008 global financial crisis from its roots in the US subprime mortgage market through the collapse of Lehman Brothers to the recession and bailouts that followed, using figures and dates as they are commonly reported in mainstream financial histories.
The Subprime Mortgage Crisis Takes Hold, 2006–2007
The crisis had its roots in a US housing boom fueled in part by subprime lending: mortgages extended to borrowers with weaker credit histories, often on adjustable terms that became unaffordable once interest rates reset higher. When US house prices peaked in 2006 and began to fall, many of these borrowers found themselves owing more than their homes were worth, and default and foreclosure rates began climbing sharply. The trouble did not stay confined to American lenders for long: mortgage debt had been repackaged into complex mortgage-backed securities and sold to investors worldwide, so losses spread quickly through the global financial system. A widely cited early warning sign came in August 2007, when French bank BNP Paribas froze withdrawals from three funds heavily exposed to US subprime debt, acknowledging that it could no longer reliably value the underlying assets. Through late 2007 and into 2008, credit markets tightened as banks grew reluctant to lend even to one another. This reluctance to lend became known as the “credit crunch,” the phrase that gave the crisis its popular name. Specialized mortgage lenders and investment vehicles built around subprime debt began failing in this period too, and rating agencies came under lasting criticism for having assigned high credit ratings to mortgage-backed securities that turned out to be far riskier than advertised.
The Collapse of Lehman Brothers and Global Panic
By early 2008 it was clear that some of Wall Street’s largest institutions were dangerously exposed to mortgage-related losses. In March 2008, investment bank Bear Stearns was acquired by JPMorgan Chase in a deal arranged with Federal Reserve backing, an early rescue that many observers read as evidence of just how fragile confidence in the banking system had become. The defining moment of the crisis followed on September 15, 2008, when Lehman Brothers, after the US government declined to arrange a rescue as it had for Bear Stearns, filed for what remains the largest bankruptcy in American history. Lehman’s collapse set off a severe panic across global markets: interbank lending nearly froze, stock markets fell sharply worldwide, and other major institutions came under acute pressure within days. Insurance giant AIG required an emergency government rescue that same week, and several major banks in the US and Europe were forced into mergers, government-backed rescues, or, in a handful of cases, outright nationalization as regulators scrambled to prevent a wider collapse of the banking system.
Bailouts, the Great Recession, and Its Aftermath
Governments moved quickly to try to contain the damage. Weeks after Lehman’s failure, the US Congress passed the roughly $700 billion Troubled Asset Relief Program (TARP) to stabilize banks, while the United Kingdom and other governments launched their own bank recapitalization and guarantee schemes. Despite these interventions, the damage to the real economy was severe and lasting: unemployment rose sharply through 2009 across the US, UK, and much of Europe in what became known as the Great Recession, and central banks cut interest rates toward zero before turning to unconventional measures such as quantitative easing to support recovery. The crisis prompted lasting changes to financial regulation, including stricter bank capital requirements introduced internationally in the years that followed, and it remains a standard reference point in discussions of financial risk, regulation, and the dangers of underpriced mortgage lending.