There have been many financial crises over the last thirty years, but the crisis that emerged in 2007 and peaked most dramatically in 2008, commonly referred to as the financial crisis, was like no other. By the late summer of 2008, most of the world’s largest banks, and many smaller ones, were carrying massive liabilities in respect of derivative securities linked to US subprime mortgage valuations. These valuations were in free fall, but the derivatives were so complex that the banks often had only a vague grasp of their own exposures, let alone those of the many other banks with which they traded on a daily basis. A string of major banks either collapsed altogether or survived only through massive injections of government funds. And as the banks became reluctant to risk lending to each other, the banking system as a whole came perilously close to collapse. The system survived, but the crisis quickly shifted to the rescuing governments, most of which were already over-borrowed, generating a global national debt crisis. Meanwhile the uncertainty associated with the crisis led to widespread economic recession, exacerbating national debt problems and prompting further austerity measures, and deepening recession. As of 2013, the effects of the financial crisis still dominate the world economy and the politics of both Europe and the USA, and they look likely to continue doing so for many years yet.
Apart from its economic effects, the financial crisis has also impacted enormously on the way people think about finance and the financial sector. This sector has always been treated with a certain amount of moral suspicion, but events have thrown a spotlight on its practices, and many people don’t like what they see. They particularly dislike the way the sector appears to continue thriving, paying massive bonuses, earning large profits and paying little taxes, while the public at large have, as a consequence it seems of the banks’ excesses, to suffer unemployment and austerity. But there is also much more widespread criticism than before of the specific practices of the sector.