On December 16, 2008, the Federal Open Market Committee (FOMC) did something it had never done before. It cut the federal funds rate—the benchmark interest rate that influences all other borrowing costs in the American economy—to a range of 0 to 0.25% . For all practical purposes, the Fed had pushed rates to zero. The central bank had reached the “zero lower bound,” the point at which conventional monetary policy could not push rates any lower. But the economy was still in free fall. Unemployment was rising. Banks were not lending. The housing market was collapsing. The Fed had used…

The Great Recession of 2007-2009 was a financial and economic upheaval unlike any other, with stock market crashes wiping out $16 trillion in household wealth. Job losses soared, with 8.7 million Americans unemployed between 2007 and 2009, creating a prolonged labor market crisis.

The 2008 financial crisis was a global catastrophe, beginning with Lehman Brothers’ collapse and rapidly spreading across the globe. European banks were heavily exposed to US subprime mortgages, leading to a domino effect that triggered nationalizations and collapses in countries like Iceland and the UK. The crisis shattered global trade, industrial production, and economies worldwide, highlighting the interconnectedness of financial systems.

The September 2008 meeting at the Federal Reserve Bank of New York was a turning point as leaders decided against bailing out Lehman Brothers, setting off a chain reaction in the financial crisis.

Warren Buffett’s 2003 warning about derivatives as ‘financial weapons of mass destruction’ was ignored as they fueled a complex and lucrative financial system. By 2007, the $596 trillion OTC derivatives market was dominated by CDS, with AIG’s risky $527 billion exposure leading to a 2008 collapse.