I experienced the worst global financial crisis in 2008. Is it coming back?

In 2008, I began my career with ICICI Bank's Branch Banking division. On my first day, I observed a line of people queuing up outside the ATMs and a longer line inside the cash counters. Those present were in a state of panic, frantically withdrawing whatever funds they had deposited in the bank. ICICI Bank was one of the Indian institutions worst affected by the global financial crisis that was precipitated by a series of events in the United States' financial sector.

As we reflect on the events of the past, it is natural to wonder: will history repeat itself? Are we doomed to make the same mistakes over and over, or can we learn from our errors and avoid similar situations in the future??

As I observe the recent events unfold, there appears to be a striking similarity between Silicon Valley Bank's bailout on March 9th, 2023 and Credit Suisse's bailout on March 19th, 2023. Both of these financial institutions were severely impacted by the ongoing global pandemic and its subsequent economic consequences. What this means is that they have had to rely on government assistance in order to remain operational. This has created a great deal of uncertainty for the future, as we can only speculate as to what will happen in September of 2023. It is likely that the state of the global economy at that time will heavily influence the fate of these institutions and other similar ones. In any case, one thing is certain: it is clear that the world is in a period of unprecedented change and volatility, with no easy solutions or paths forward.

The collapse of Bear Stearns in March of 2008 and the collapse of Lehman Brothers in September of 2008 were two catalytic events that precipitated the global financial crisis. These events set off a chain reaction that caused severe economic repercussions around the world. Here is a chronological overview of some other major occurrences between these two collapses:

On March 14, 2008, the investment banking firm Bear Stearns publicly announced that it was facing a severe liquidity crisis and had sought emergency financial assistance from both JPMorgan Chase and the Federal Reserve Bank of New York. This announcement marked a dramatic shift in the company's fortunes, as only weeks prior Bear Stearns had been considered one of the most successful and powerful investment banks in the U.S. The liquidity crisis was caused by a sudden increase in mortgage defaults, which had led to significant losses for the firm and put its future in jeopardy. In response to this announcement, the financial markets quickly dropped in value as investors tried to assess the implications of this news for other firms on Wall Street. As a result of this emergency funding, Bear Stearns was able to continue operations until its eventual collapse in 2008. On March 16, 2008, The Federal Reserve announces a bailout of Bear Stearns, with JPMorgan Chase acquiring the firm for $2 per share (down from its previous market value of $170 per share).

On September 7, 2008, the Federal Housing Finance Agency (FHFA) made a monumental decision that would have a lasting effect on the mortgage industry in the United States. The FHFA determined that it was necessary to place Fannie Mae and Freddie Mac, two of the most influential mortgage giants in the country, into conservatorship. This meant that the FHFA would take control of their operations and manage them in order to stabilize the housing market and protect taxpayers from potential losses. It was an unprecedented move that had its fair share of detractors and supporters alike, but in the end it allowed for some much-needed reform within the industry.

On September 14, 2008, Bank of America made a landmark announcement that it had entered into an agreement to purchase Merrill Lynch for an estimated $50 billion in stock. The bank's ambitious move was seen as a significant shift in the financial sector and marked one of the largest acquisitions in history. The acquisition would bring together two of the world's leading financial institutions, both of which had long histories of providing banking and investment services to customers around the globe. In addition to the immediate benefits that shareholders of both companies would receive, it was expected that the combined entity would be better positioned to take advantage of emerging opportunities in the marketplace. Ultimately, Bank of America's acquisition of Merrill Lynch would help to create a more dynamic and global financial powerhouse.

On September 15, 2008, Lehman Brothers, a major financial services firm on Wall Street, filed for Chapter 11 bankruptcy protection in the U.S., marking the largest bankruptcy filing in American history. This action was taken after Lehman Brothers had been facing immense financial strain for months due to the global economic crisis and its own risky investments. The filing of Chapter 11 bankruptcy allowed the company to reorganize its debt and continue operating under court supervision, but ultimately it had to sell off all of its assets and liquidate itself by December 2008. The collapse of Lehman Brothers shook the entire global economy, resulting in a major financial downturn that lasted for years afterwards.

History certainly provides us with a wealth of lessons that can be analyzed, studied and applied to current events. Throughout human existence, there have been patterns of behavior that have been repeated time and again. Wars have been fought for centuries, with the same causes leading to similar outcomes. Social movements have come and gone, yet their core principles remain largely unchanged. We must consider these examples when considering our own decisions, for if we ignore them, then we do so at our own peril. As such, it is important that we study and understand history in order to better prepare ourselves for what may come in the future. Only by doing so can we truly hope to break free from the cycle of repeating our mistakes.