The financial collapse in the fall of 2008 was long in the making—the expression of a protracted global crisis, centered in the United States. The WSWS had anticipated this development, and in the year preceding the crash had explained the far-reaching significance of the turbulence in the US housing market.

On January 11, 2008 the WSWS published a report by WSWS International Editorial Board Chairman David North to a national meeting of the SEP in the United States, “Notes on the political and economic crisis of the world capitalist system and the perspectives and tasks of the Socialist Equality Party.” It began:

2008 will be characterized by a significant intensification of the economic and political crisis of the world capitalist system. The turbulence in world financial markets is the expression of not merely a conjunctural downturn, but rather a profound systemic disorder which is already destabilizing international politics... Sixteen years after the dissolution of the Soviet Union, an event which supposedly signaled the definitive and irreversible triumph of global capitalism, the world economy is in a shambles.

He continued:

The persistent tendency toward the creation of speculative bubbles arises out of deep-rooted contradictions in the development of the world capitalist system, especially bound up with the historical decline in the global position of American capitalism. The long-term decline in the profitability of US-based industry has propelled the drive by American financial institutions for alternative sources of high returns on investment. The mode of existence of the American ruling elite has been characterized for the last 30 years by the ever-wider separation of the process of wealth accumulation from the processes of industrial production.

On Monday, September 15, 2008, Lehman Brothers, the fourth largest US investment bank, filed for bankruptcy. The 158-year-old icon of American finance collapsed in the midst of a mushrooming crisis of American and world financial markets precipitated by the bursting of the subprime mortgage and credit bubble that had generated staggering profits on Wall Street over the previous years. The same day, Merrill Lynch, the third largest US investment bank, itself 94 years old, vanished as an independent entity. It allowed itself to be sold for a song to Bank of America, under pressure from the US government, rather than face the same fate as Lehman Brothers.

One week earlier, the US government had taken over the state-sponsored mortgage-finance giants Freddie Mac and Fannie Mae, at a cost of $200 billion in public funds.

On Tuesday, September 16, the government seized control of American International Group (AIG), the world’s largest insurance firm and biggest dealer in credit default swaps. The Federal Reserve plowed $85 billion into the firm to prevent it from collapsing and triggering a chain reaction of financial bankruptcies around the world.

Nine days later, on September 25, the government seized the savings and loan giant Washington Mutual and closed it down, carrying out the largest corporate bankruptcy in American history. Credit markets across the globe froze, as banks refused to lend to one another, fearful of not being repaid. Stock markets crashed. Other, even bigger, titans of Wall Street, the City of London and other world financial centers were heading for collapse.

The actions of the American ruling class, led by the Bush administration and supported by the Democratic Party, were desperate attempts to prop up the financial system, while at the same time utilizing the crisis to engineer an historically unprecedented transfer of wealth into its own pockets. Not only were those who created the crisis not held accountable, they were able to vastly enrich themselves. For example, much of the money handed to AIG was funneled directly into Wall Street titans like Goldman Sachs, who were paid in full for insurance contracts they held with the company.

The criminal enterprise culminated in the $700 billion bank bailout dubbed the Troubled Asset Relief Program (TARP). The Socialist Equality Party denounced the bailout in a statement that declared it a plan for “an unprecedented transfer of public funds to the major banks and the American financial elite at the expense of the broad mass of the people… As in the aftermath of 9/11, [the financial aristocracy] is seeking to utilize the crisis to push through policies that would otherwise be considered entirely unacceptable.”

The House of Representatives initially rejected the bailout, largely because of opposition by the right-wing of the Republican Party. This triggered a huge fall in the stock market, and a furious reaction in the ruling elite, summed up in a comment published by the Murdoch-owned Times of London under the headline “Congress is the Best Advert for Dictatorship.”

In a subsequent comment the WSWS wrote: “The provocative language, drawing the logical conclusion of the anti-democratic sentiments being expressed more widely, ultimately expressed the objective ramifications to the economic crisis that is eating away at US and world capitalism.”

The TARP bill was subsequently passed and signed into law on October 3. Similar bailouts were enacted by the Labour government in Britain, the conservative German government of Angela Merkel, the Sarkozy government in France, and governments in Spain, Sweden, Greece, Ireland and throughout eastern Europe. Whether the ruling parties were liberal or conservative, far-right or social-democratic, they all took the same class standpoint: saving the banks and big investors and imposing the cost on working people.