Ten years have passed since Lehman Brothers filed for bankruptcy on September 15, 2008.This is possibly the moment in which the official start of the crisis can be considered, which many think is still going on, at least in Spain. This bankruptcy was also different due to the lack of rescue on it, the myth of “too big to fail” had fallen.
This trigger caused the financial system in Europe and the US to be reformed, with the famous Dodd-Frank, EMIR, MIFID and MIFIR laws. In addition, multiple films and documentaries have been made, books and reports have been written about it. How are we ten years later?
Much has been said about the Lehman Brothers crisis and how we are ten years later in many media outlets, often much better than we can talk about in this blog, but the situation can be summarized.
Ten years of scares and precariousness
One of the problems that the banks had was that relatively recent financial product invented by the British economist Blythe Masters who was by then a young manager of JP Morgan. the cds In principle they were a way of managing risk, but when they were applied to mortgage loans and families were able to stop paying the mortgages on their houses, the crisis broke out.
On Lehman Brothers problems they talked at length, Friday September 12, 2008 its price was 7% of what it had been in February of the same year. Support was expected from the government or the rest of the financial actors, but it never came.
The truth is that very few were able to predict the financial crisis that we were going to face and even less so that it would spread to the rest of the economy, for example the OECD was caught by surprise. It is true that the real estate market was overvalued, at least in Spain, but very few assumed that there would be a sharp fall in the global economy.
Lehman Brothers wasn’t the only bank in trouble, it was just the first. In fact many banks were taken over by others or bailed out. In the US, for example, Merryl Lynch was taken over by Bank of America and the mortgage banks Fannie Mae and Freddie Mac, despite their cartoon names, were rescued by the state.
In Europe In the United Kingdom, several banks that were nationalized also had problems, such as Lloyds-TSB., Northern Rock or Bradford & Bingley. In Germany the Hypo Bank had to be nationalized and in Spain almost all savings banks or banks resulting from their merger were fully or partially rescued, Bankia being the most notorious example. This is not counting many other European names such as AIG, Dexia or Fortis or others that are currently only feared.
All this ended up infecting the economy, causing Millions of people will be unemployed around the world., in the US the rate reached 10%, something not seen since the 1980s (and very high for this country). Some people, thanks to the photographers, became the faces of the crisis, the losers of it. Reuters has made a report looking for them and seeing what has become of them.
In addition, in Spain it has left a situation of job insecurity pretty strong for those he caught studying during the crisis. In Spain, 29% of young people between 20 and 24 years old are unemployed, 73% of young people have a temporary contract, in the EU it is 43.9%. In 2008, the figures for youth temporary employment were 59.2% and 40% in the EU. It seems that the crisis is not over yet, The country brings together a series of individual stories about young people caught up in the crisis as teenagers and facing a difficult job market ten years later.
Will the financial crisis return?
Recently there is talk that a possible financial crisis could be returning in the coming months. Well, as they comment on Nothing is freealthough much has been approved regulationit is true that more and more “shadow banking” is beginning to emerge, that is, banking services provided by non-bank entities, including the new fashionable companies: fintech.
In addition, although the banking regulation that has been implemented should help solve problemsit seems that the Trump administration intends to relax financial regulation, while the EU on the one hand will have to compete and on the other it is true that it is difficult for it to coordinate efforts between member states.
Lastly, I would highlight one thing: the financial markets recover sooner or later. The proof is in the S&P500, which since its fall has risen again to very high levels. In fact, as the magazine GQif someone had bought in that year, today they would have doubled their investment, which is not a bad return for a period of ten years, and that without considering the benefits of the dividends distributed by the companies that make it up over the over so many years.