The 2008 catastrophe was not a single dramatic event, but rather the result of irresponsible lending practices in the housing market. Subprime mortgages, which were issued to customers with weak credit, were packaged into complicated financial instruments and sold around the world. When house values fell, defaults skyrocketed, causing fear throughout the banking sector.
The fall of Lehman Brothers in September 2008 served as a tipping point. The Dow Jones Industrial Average fell 777 points, marking the greatest single-day collapse in history at the time. Fear swept global markets, causing cascading bank collapses and a devastating recession.
Governments intervened with bailouts and stimulus packages to gradually restore stability. Although the markets have recovered, the effects of the catastrophe persist. It exposed flaws in the banking system and served as a harsh reminder of the peril of global economic interconnectivity.