The 2008 financial crisis, explained: how bad home loans nearly broke the global banking system.

Originally reported as: “Lehman Brothers files for bankruptcy as credit markets seize up worldwide”

In September 2008, the investment bank Lehman Brothers collapsed into what was, at the time, the largest bankruptcy in US history, at roughly $600 billion in assets. It was the most dramatic moment in a crisis that had been building for years, as banks made and packaged huge numbers of risky home loans, then sold them worldwide as supposedly safe investments. When American homeowners began defaulting in large numbers, the value of those packaged loans collapsed, and banks that had borrowed heavily to hold them found themselves facing catastrophic losses almost overnight. Governments and central banks around the world responded with unprecedented bailouts and rate cuts, but the damage was already done: a deep global recession, millions of lost jobs, and a wave of financial reform that reshaped banking regulation for years afterward.