Within six months, credit tightened and inter-bank interest rates soared, as banks suffered massive losses on the derivatives they were profiting off from the US housing boom.īy September 2008, US investment bank Lehman Brothers went bust, ushering in a protracted global economic contraction unlike anything seen since the Great Depression of the 1930s. In August 2007, the first tremors of the credit crunch were felt when BNP Paribas suspended its sub-prime funds because of an evaporation of liquidity.
