Financial crisis of 2008: Navigating and mitigating risks

May 2008
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Financial crisis of 2008: Navigating and mitigating risks: PwC

At a glance

Over the past year the financial markets have experienced unprecedented turmoil, uncertainty and change. What initially began as a decline in homes values and illiquidity in the “subprime” mortgage market, has now evolved into a broader capital markets crisis having far reaching global ramifications.

Over the past year the financial markets have experienced unprecedented turmoil, uncertainty and change. What initially began as a decline in homes values and illiquidity in the “subprime” mortgage market, has now evolved into a broader capital markets crisis having far reaching global ramifications. In addition to the failure of the $330 billion auction rate securities market in early 2008, we have seen the Federal government’s decision to place both Fannie Mae and Freddie Mac under conservatorship and the failure or acquisition of several of the largest global banks.

More recently, the US Government announced, among other things, that it would acquire up to $700 billion of risky mortgage securities weighing heavily on financial institutions – a situation reminiscent of the Resolution Trust Corporation established during the savings and loan crisis of the late 1980s and early 1990s. It is clear that all financial sectors, including investment and commercial banks, broker-dealers, monoline and other insurance companies, investment managers and hedge funds, have been affected by these market events.