The biggest financial crises of the last four decades
Markets have experienced massive upheaval in the last month, prompted in part by two of the three largest banking failures in U.S. history while Swiss lender Credit Suisse was bought by rival UBS Group AG in a merger engineered by Swiss regulators.
Markets have experienced massive upheaval in the last month, prompted in part by two of the three largest banking failures in U.S. history while Swiss lender Credit Suisse was bought by rival UBS Group AG (UBSG.S) in a merger engineered by Swiss regulators.
Fears of banking contagion remain, and investors are worried that global economies will suffer if the effects of higher interest rates torpedo more lenders. Here is a rundown of some of the biggest financial crises in the last 40 years:
U.S. SAVINGS AND LOAN CRISIS
Over 1,000 savings and loan (S&L) institutions were wiped out in the crisis that unfolded throughout the 1980s, resulting in up to $124 billion in costs to taxpayers.
The upheaval was rooted in the unsound real estate and commercial loans made by S&Ls after the United States removed interest-rate caps on their loans and deposits, which allowed them to take on more risk.
After nearly a decade of supercharged growth, the junk bond market slumped in the late 1980s following a series of interest rate hikes by the Federal Reserve.
Michael Milken had helped popularize the financial instrument, with many using it as a way of funding leveraged buyouts. But supply eventually outpaced demand, and the market tanked. Milken was charged with securities and reporting violations. He paid a $200 million fine and served a 22-month sentence in jail.
ASIAN CURRENCY CRISIS
A massive outflow of capital from Asian economies in the mid-to-late 1990s put pressure on the currencies in the region, necessitating government support.
The crisis kicked off in Thailand, where authorities had to devalue the Thai baht after months of trying to defend the currency’s peg to the dollar drained its forex reserves. The contagion soon spread to other markets in Asia including Indonesia, South Korea and Malaysia.
Global bodies, including the International Monetary Fund and the World Bank, had to step in with rescue packages amounting to more than $100 billion for the economies.
Sources: Central bank reports, media reports
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