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The '''Financial Crisis of 2008''' is an ongoing financial crisis centered in the [[United States of America|United States]], with reverberations in [[Europe]] and around the [[world]]. Losses thus far have run to hundreds of billions of [[dollar]]s. Owners of stock in major financial institution have lost over 50% of their money, and owners of some have lost 99% as major [[bank]]s closed down. The [[stock market]] has declined 20%-50% in major countries and [[pension]] funds have lost value. The price of American houses fell 20%, with much larger declines in [[California]] and [[Florida]].  However, thus far ordinary depositors with cash in the bank have suffered no losses. Owners of stocks in the 5000 largest U.S. corporations have lost over 8 trillion dollars in 2008, dropping to $12 trillion in October from $20 trillion in January 2008.  

The '''Financial Crisis of 2008''' is an ongoing financial crisis centered in the [[United States of America|United States]], with reverberations in [[Europe]] and around the world. Losses thus far have run to hundreds of billions of [[dollar]]s. Owners of stock in major financial institution have lost over 50% of their money, and owners of some have lost 99% as major [[bank]]s closed down. The [[stock market]] has declined 20%-50% in major countries and [[pension]] funds have lost value. The price of American houses fell 20%, with much larger declines in [[California]] and [[Florida]].  However, thus far ordinary depositors with cash in the bank have suffered no losses. Owners of stocks in the 5000 largest U.S. corporations have lost over 8 trillion dollars in 2008, dropping to $12 trillion in October from $20 trillion in January 2008.  

In late September the crisis focused on liquidity--financial companies owned hundreds of billions of dollars of "toxic" securities, mostly based on U.S. [[mortgage]]s; they could not sell the toxic securities because no one knew how much they were worth, and large scale loans between major institutions stopped flowing as the system lost liquidity and froze up. A $800 billion rescue plan became law in the U.S. October 3, but its impact will not be clear for a while. Meanwhile Europe's economic crisis continues to deteriorate, as trillions of dollars in losses accumulate there and in Russia, China and India.

In late September the crisis focused on liquidity--financial companies owned hundreds of billions of dollars of "toxic" securities, mostly based on U.S. [[mortgage]]s; they could not sell the toxic securities because no one knew how much they were worth, and large scale loans between major institutions stopped flowing as the system lost liquidity and froze up. A $800 billion rescue plan became law in the U.S. October 3, but its impact will not be clear for a while. Meanwhile Europe's economic crisis continues to deteriorate, as trillions of dollars in losses accumulate there and in Russia, China and India.

    

    

===European crises===

===European crises===

The crisis affected Britain and other countries as well, as the British housing bubble burst about the same time as the U.S. The British government had to take over major mortgage lenders, including Northern Rock in February, 2008.  Northern Rock's loans (£25 billion) and guarantees (£30 billion) extended by the Bank of England, together with the value of the company's mortgages (£55 billion), or £100 billion in all, were added to the British national debt.  Bradford & Bingley, half the size of Northern Rock, held £40 billion in toxic mortgages, and was nationalized in late September.  

Heavy borrowing by European banks meant the crisis immediately affected Britain and other countries as well, as the British housing bubble burst about the same time as the U.S. The British government had to take over major mortgage lenders, including Northern Rock in February, 2008.  Northern Rock's loans (£25 billion) and guarantees (£30 billion) extended by the Bank of England, together with the value of the company's mortgages (£55 billion), or £100 billion in all, were added to the British national debt.  Bradford & Bingley, half the size of Northern Rock, held £40 billion in toxic mortgages, and was nationalized in late September.  

In late September, the Fortis bank, the world's 20th largest business, was partially nationalized by three governments who injected $16 billion in emergency funds. The [[Belgium|Belgian]], [[Netherlands|Dutch]] and [[Luxembourg]] governments tried to inject capital but as consumer confidence plunged, Netherlands nationalized the Dutch wing of the company and the rest was sold in early October to the French bank BNP Paribas for €14.5 billion ($19.7 billion). In [[Germany]] Hypo Real Estate was given €35 billion ($50 billion) of credit guarantees by the government and other banks.  The government of [[Iceland]] took over its large banks, as the entire island economy verged on bankruptcy because it depended so much on large foreign loans. Most of the European countries hurriedly announced guarantees of personal bank deposits to avert further drop in consumer confidence and runs on the banks.  Stock markets around the world continue to decline as pessimism worsens.

In late September, the Fortis bank, the world's 20th largest business, was partially nationalized by three governments who injected $16 billion in emergency funds. In 2007 Fortis borrowed heavily for its $100 billion takeover of rival bank ABN Amro; the deal came at the market’s peak, and Fortis now cannot pay its debts. The [[Belgium|Belgian]], [[Netherlands|Dutch]] and [[Luxembourg]] governments tried to inject capital but as consumer confidence plunged, Netherlands nationalized the Dutch wing of the company and the rest was sold in early October to the French bank BNP Paribas for €14.5 billion euros ($19 billion dollars).  

 

In [[Germany]] Hypo Real Estate was given €50 billion euros ($68 billion dollars) bailout by the government.  The government of [[Iceland]] took over its large banks, as the entire island economy verged on bankruptcy because it depended so much on large foreign loans. Most of the European countries hurriedly announced guarantees of personal bank deposits to avert further drop in consumer confidence and runs on the banks.  Stock markets around the world continue to decline as pessimism worsens.

The European Central Bank aggressively lent money to banks trying to ensure that banks would have adequate cash. The moves have not reassured savers or investors, and European stock markets have fallen even further than the American stock markets, as have the stock markets in China and Russia.  The leaders of France, Germany and Italy vowed to prevent a Lehman Brothers-style failure in Europe but they did not offer an American-style bailout package.<ref>Carter Dougherty, Nelson Schwartz and Floyd Norris, "Financial Crises Spread in Europe," [http://www.nytimes.com/2008/10/06/business/06markets.html?_r=1&hp&oref=slogin ''New York Times,'' Oct 6, 2008]</ref>

The European Central Bank aggressively lent money to banks trying to ensure that banks would have adequate cash. The moves have not reassured savers or investors, and European stock markets have fallen even further than the American stock markets, as have the stock markets in China and Russia.  The leaders of France, Germany and Italy vowed to prevent a Lehman Brothers-style failure in Europe but they did not offer an American-style bailout package.<ref>Carter Dougherty, Nelson Schwartz and Floyd Norris, "Financial Crises Spread in Europe," [http://www.nytimes.com/2008/10/06/business/06markets.html?_r=1&hp&oref=slogin ''New York Times,'' Oct 6, 2008]</ref>

Britain on October 8 announced a gigantic £500 billion ($850 billion) rescue plan for its banks; the government would partially own them.  Prime Minister [[Gordon Brown]] said banks would still be run by their old managers, but that the government would have to be "satisfied" on matters of salaries, [[dividend]]s and lending activities.  The money involved is about a third of Britain's annual [[Gross Domestic Product|GDP]] (comparable to $5 trillion in the U.S. economy.)

Britain on October 8 announced a gigantic £400 billion ($680 billion) rescue plan for its banks; the government would partially own them.  Prime Minister [[Gordon Brown]] said banks would still be run by their old managers, but that the government would have to be "satisfied" on matters of salaries, [[dividend]]s and lending activities.  The money involved is about a third of Britain's annual [[Gross Domestic Product|GDP]] (comparable to $5 trillion in the U.S. economy.)

On October 13, Britain announced it would spend £50 ($85 billion) to nationalize two of the five largest banks, HBOS (Halifax Bank of Scotland) and RBS (Royal Bank of Scotland), while taking partial ownership of a third, Lloyds TSB. A fourth, Barclays will remain private if it can raise an additional £7 billion. The fifth, HSBC is based in Hong Kong and will remain private.<ref>"Financial crisis: HBOS and RBS 'to be nationalised' in £50 billion state intervention," [http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3185120/Financial-crisis-HBOS-and-RBS-to-be-nationalised-in-50-billion-state-intervention.html?source=EMC-new_12102008 London ''Telegraph'' Oct 13, 2008] The existing stockholders were not bought out. They will continue to hold shares in the banks, but they will be outvoted by the new stock owned by the government.</ref>

On October 13, Britain announced it would spend £50 ($85 billion) to nationalize two of the five largest banks, HBOS (Halifax Bank of Scotland) and RBS (Royal Bank of Scotland), while taking partial ownership of a third, Lloyds TSB. A fourth, Barclays will remain private if it can raise an additional £7 billion. The fifth, HSBC is based in Hong Kong and will remain private.<ref>"Financial crisis: HBOS and RBS 'to be nationalised' in £50 billion state intervention," [http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3185120/Financial-crisis-HBOS-and-RBS-to-be-nationalised-in-50-billion-state-intervention.html?source=EMC-new_12102008 London ''Telegraph'' Oct 13, 2008] The existing stockholders were not bought out. They will continue to hold shares in the banks, but they will be outvoted by the new stock owned by the government.</ref>