The Deepening Global Financial Crisis

The turmoil in financial markets intensified in September 2008 following the bankruptcy of Lehman Brothers and other institutions and the extension of emergency credit lines to American International Group (AIG), as market participants lost confidence that the case-by-case approach to defaults adopted so far would prove effective in the face of mounting systemic risks. Money markets, interbank markets, and markets for short-term commercial paper in the United States and Europe largely froze, as reflected, inter alia, in bank credit default swap (CDS) and corporate bond spreads, which rose to unprecedented levels.