Saul Eslake Economic Analysis – December 2008

2008 Saul Eslake Economic Analysis Dec 2008The global financial crisis which began with the sub-prime mortgage market meltdown in July 2007 took a much more ominous turn following the US Treasury’s decision to allow Lehman Brothers to fail in mid-September, the subsequent decisions to take AIG, Fannie Mae and Freddie Mac into ‘conservatorship’ and the failure of Washington Mutual. These events triggered an almost complete shut-down of the credit and money markets and an ‘investor’ run on the global banking system, and raised the spectre of a retail depositor run on the banking systems of some countries.Download the full report

In mid-October, governments and central banks of most Western economies and many emerging economies undertook to guarantee their banking systems’ wholesale borrowings and retail deposits, and (where necessary) to inject substantial amounts of equity capital into banks.

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