The financial crisis of 2008 was the single largest crisis of capitalism since the onset of the Great Depression in 1929. It was not foreseen and so came as a complete surprise requiring desperate and immediate measures to shore up finance capital and contain the crisis. Commitments to support the banks reached at least $7 trillion, around 10% of global gross domestic product (GDP). Unsurprisingly, the effects of this were felt worldwide with immediate down-turns in trade in nearly every country and significant losses of GDP in those most involved. These effects were further compounded by policies adopted to deal with the crisis, including austerity, which led to widening inequality and growing political opposition from across the political spectrum. Ten years on, the end result is that while capitalism has been temporarily ‘saved from itself’, the causes of the crisis have not been resolved and many of the financial practices that originally contributed to the crisis remain in place. Similarly, while Wall Street and the City of London were the main contributors to the crisis, both remain unreformed even though there is growing evidence that they fundamentally distort the economies of both countries, ending up costing both money.

The crisis was centred in the ‘transatlantic economy’ encompassing both the United States and the European Union, with Wall Street and the City of London at the core. “Never before”, as Adam Tooze writes in his exhaustive study of the crisis and its aftermath, “not even in the 1930s had the (capitalist) system come so close to total implosion” (Crashed: How a Decade of Financial Crises Changed the World, 2018). It did so because the banking systems of the ‘transatlantic economy’ had become so interconnected that a major crisis in one country or major bank impacted on them all, almost immediately, with substantially increased risks and massive costs: the so called ‘contagion effect’. This meant that although the immediate origins of the crisis were within the US domestic market and, in particular, the collapse of the ‘sub-prime mortgage market’ it was not only US banks that were put at risk. By 2008 roughly a quarter of such mortgages were held outside the US particularly in Europe and the UK. When the market for such mortgages began to drop in 2007 and became highly suspect, then toxic, many banks were soon affected. This led to the contraction of wholesale funding markets between financial institutions and the complete collapse of interbank credit. Bank failures inevitably followed.

While there were a number of these across the ‘transatlantic economy’ the two most important were in the US and the UK. The failure of the investment bank Lehman Brothers in New York on September 15, 2008 is widely regarded as the most dramatic. For the US Treasury Secretary, Hank Paulson, it was ‘an economic 9/11’. Everything began unwinding quickly and by the morning of 20th September, Paulson informed the US Congress “that unless they acted fast, $5.5 trillion in wealth would disappear by 2 pm ... and they faced the collapse of the world economy within 24 hours” (Tooze, p.162). Days later it was the turn of the UK. The bank most at risk here was the Royal Bank of Scotland (RBS), then the largest bank in the world. It demonstrably began to fail in early October. Alistair Darling, the

Chancellor of the Exchequer, recalls that he was phoned by its chairman on 7th October, who told him his bank was going bust that afternoon and what was he (Darling) going to do about it.

RBS and Lloyds TSB-HBOS, also seriously at risk, were saved by partial nationalisations while the other major UK banks were required to recapitalise, with the UK government standing as guarantor. Similar action took place in other European countries which were also faced with bank collapse. But the most decisive action took place in the US. This involved a mix of government guarantees and private action to purchase financial institutions and recapitalise the banks. At first Congress opposed action but it was eventually passed as the TARP programme on 3rd October and ‘imposed’ on the nine largest US banks on 13th October. It was followed by further action by the US Federal Reserve to provide virtual unlimited access to US dollars to the central banks of the major capitalist countries, to stabilise exchange rates and avert currency crises.

The ‘transatlantic economy’ was rescued by the state in the form of the central banks and the government finance ministries, backed by the head of government. Remarkably few persons were involved and the key decisions were made between them and the bankers in small rooms. This was Marx’s ‘executive committee of the bourgeoisie’ for early twenty-first century capitalism. It dramatically exposed the nature of modern finance capitalism. This was based on an increasing concentration of finance in relatively few global banks and financial institutions (less than 100 worldwide). It was characterised “not in terms of an ‘island model’ of international economic interaction – national economy to national economy – but through the ‘interlocking matrix’ of corporate balance sheets – bank to bank” (Tooze, p.9). It necessarily meant that further global action to strengthen capitalism would need to be taken beyond the US and the UK. Among the most important was the identification of ‘systemically important financial institutions’ at the centre of the global system which were vital to its future survival. Twenty-nine were listed in 2011 with their headquarters in the US, Europe, Japan and China. Between them they held total assets of $46 trillion, roughly 22% of all financial assets worldwide. They would in future be subject to a special regime of oversight to provide future resilience to the global capitalist system if the banks again began to fail.