What was the financial crisis, the credit crunch - and will it all happen again?
This is Money Podcast
This is Money
4.1 • 650 Ratings
🗓️ 18 August 2017
⏱️ 30 minutes
🧾️ Download transcript
Summary
Ten years ago last week the greatest game of hide and seek was about to come to an end.
Banks had been lending money to people who had no way of ever paying it back to buy houses they would never be able to afford.
But rather than writing off the debts, they packaged them up into complex investments, pretended they were safe and selling them to investors who had no idea of what they were buying.
The bad stuff was carefully hidden among a few quality loans and everyone was happy – for a while.
It was insane. It was global. It was the financial crisis.
Then came the credit crunch where the grease that turns the wheels of economies dried up. Banks collapsed. Governments went bust.
Over the past week commentators have been recounting where they were and how they saw it coming. But they didn’t see it coming. Few did.
This week, Simon Lambert and Georgie Frost offer up one of the best, honest and understandable accounts of what really happened after BNP Paribas shut down three hedge funds specialising in sub-prime mortgage debt, marking the beginning of the financial crisis when the global economy stared at the precipice.
This episode really is a must listen.
Enjoy.
Transcript
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| 0:00.0 | Welcome to the This Is Money show. I'm Georgie Frost and this month is being marked as a 10 year anniversary of the financial crisis. |
| 0:11.0 | A chain of events between 2007, 2008 resulted in banks collapsing, huge job losses and some governments even going bust. |
| 0:19.0 | So in today's show I'm joined by This Is Money editor, Simon Lambert, |
| 0:22.3 | who will recall what it was like being a financial journalist at the time, |
| 0:25.5 | but also reflect on what caused it, what if anything, we've learnt, |
| 0:29.3 | and ask, as the Queen, speaking for the whole nation at the time, did, |
| 0:33.0 | why did no one see it coming? |
| 0:35.2 | And could it happen again? |
| 0:36.7 | You know, in a few years' time when |
| 0:38.2 | institutional memories start to fade and the people around have all gone and retired, then |
| 0:43.2 | that's when the risks reoccur. You always have to be vigilant. The lesson from 10 years ago is |
| 0:47.7 | something that can start as apparently a small ripple in the water can become, you know, |
| 0:53.1 | mountainous seas very quickly. |
| 0:54.9 | The first milestone came when French bank BMP Parabar froze three hedge funds specialising in subprime loan, |
| 1:01.2 | something most ordinary folk could never heard of, but we soon would. |
| 1:04.8 | The ECB injected 95 billion euros into the markets. |
| 1:08.5 | The US Fed also added temporary reserves. |
| 1:11.7 | And all of a sudden, |
| 1:16.8 | we realised the worries related to the subprime mortgage market weren't going away. Personally, |
| 1:21.2 | the following month in September, having just moved up to Newcastle as a sports reporter, I found myself interviewing not Sam Allardyce, but queues of people outside Northern Rock. It was a year later, though, when events |
| 1:28.7 | culminated in the collapse of US Bank Lehman Brothers, that the financial car really came off |
| 1:34.0 | the road. We've since been living in a very long shadow of those events, regulators, economists, |
... |
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