when investors realized the cdos were worthless due to the toxic debt they represented they attempted to unload the obligations however there was no market for the cdos the subsequent cascade of subprime lender failures created liquidity contagion that reached the upper tiers of the banking system two major investment banks lehman brothers and bear stearns collapsed under the weight of their exposure to subprime debt and more than 450 banks failed over the next five years several of the major banks were on the brink of failure and were rescued by a taxpayer funded bailout 1617
the u s government responded to the financial crisis by lowering interest rates to nearly zero buying back mortgage and government debt and bailing out some struggling financial institutions 13 with rates so low bond yields became far less attractive to investors when compared to stocks the government response ignited the stock market by march 2013 the s p bounced back from the crisis and continued on its 10 year bull run from 2009 to 2019 to climb to about 200 18 the u s housing market recovered in most major cities and the unemployment rate fell as businesses began to hire and make more investments one big upshot of the crisis was the adoption of the dodd frank wall street reform and consumer protection act a massive piece of financial reform legislation passed by the obama administration in 2010 dodd frank brought wholesale changes to every aspect of the u s financial regulatory environment which touched every regulatory body and every financial services business notably dodd frank had the following effects 19the 2020 financial crisisin february of 2020 the covid19 virus was discovered in china the disease soon made its way around the world killing millions and stoking fear this in turn caused markets to fall and credit to the financial system to grind to a halt the pandemic resulted in strict lockdowns and travel restrictions which had a significant impact on global supply chains consumer demand and financial markets investors became increasingly concerned about the economic consequences of the pandemic leading to a rapid sell off in stock markets around the world the crash was particularly severe in march 2020 when the dow jones industrial average djia experienced its worst day since 1987 falling over 2 000 points in a single day other major stock indexes such as the s p 500 and the ftse 100 also experienced significant losses 202122 from february 12 through march 23 2020 the djia lost 37 of its value 23central banks and governments around the world responded with various measures to stabilize the financial system and support the economy including monetary stimulus and fiscal policies such as government spending and tax breaks despite the severity of the initial crash the markets rebounded somewhat in the following months and many investors saw significant gains toward the end of 2020 and into 2021 where markets hit new all time highs however the long term economic consequences of the pandemic are still unclear and many industries and countries are still struggling to recover fully 