The Financial Crisis began on Monday, September 15, 2008 when investment bank Lehman Brothers announced that it would be filing for Chapter 11 bankruptcy following a few quarters in which the bank suffered a multi-billion dollar loss. At the time of the filing, Lehman Brothers had a total of $613 billion in bank debt, $155 billion in bond debt, and assets valued at $639 billion. In other words, its liabilities exceeded its assets by $129 billion. However, it is worth noting that Lehman Brothers was not the first bank to fail during this period. Over the February 2007 to March 2008 period, over 100 mortgage lenders and the investment bank Bear Stearns failed due to losses on subprime loans (as well as an inability for many mortgage lenders to securitize and sell off loans).

Over the July 2007 to March 2008 period, various Wall Street firms suffered aggregate write-downs of $175 billion. By November 2008, this increased to an aggregate total of $750 billion, enough to eliminate most of the capital in the worldwide banking system. This is around the time that Central Banks and governments around the world began to step in, with the $700 billion Troubled Asset Relief Program being passed on October 3, 2008.

In total, the Federal Reserve, European Central Bank, and other central banks spent at least $2.5 trillion buying troubled assets of of the banks and the governments of the world spent at least another $1.5 trillion bailing out their own banks, generally through the purchase of newly issued preferred equity.

However, the important takeaway here is that total asset write-downs were only $750 billion in November 2008 when the system was on the verge of collapse.

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