The financial crises that have shaken the world’s economy

September 2023 marked six months since the collapses of Silicon Valley Bank (SVB) and Signature Bank, which shook the international tech sector and caused the biggest bank collapse since the 2008 financial crisis.

The domino effect of an event of this magnitude on a country's economy can be devastating, and  its repercussions, according to experts, are usually not limited to the United States. The whole world could be affected.

Yet those of Silicon Valley Bank and Signature Bank are not isolated cases. US history is studded with moments in which great jewels of the economy shook stock markets around the world.

In 2001, the Texan energy company Enron, known as the ‘darling of Wall Street’, declared bankruptcy and did so surrounded by a halo of scandal, with a guilty verdict affecting the company's top management of a fraud trial.

Pictured: Kenneth Lay, former president of Enron

Not to mention the loss of jobs for over 20,000 people and billions of dollars in pension funds went up in smoke.

In 2002, the telecommunications giant Worldcom was forced to declare bankruptcy with over 30 billion dollars in debt. Operating in 65 countries and with a workforce of about 85,000 employees, the crash was also the result of a colossal accounting fraud of about 3.8 billion dollars.

Pictured: Federal agents arrest Worldcom supervisor David Myers

With the stock market crash following the 9/11 terrorist attacks, Conseco, one of the largest insurance companies in the US, began the receivership procedure of the American bankruptcy law, because it was unable to pay off its debts.

If there is, however, a financial crash that has really shaken the foundations of America, and the world, is that of Lehman Brothers, one of the largest investment banks in New York and the 4th in the United States.

The bankruptcy procedure of Lehman Brothers originated from the subprime mortgage crisis, granted to people with minimum guarantees of solvency.

It affected not only the United States, but also Latin America and  Europe. The newspapers of the time spoke of a Great Recession.

Also in 2008, the American authorities closed down Washington Mutual, hit by the mortgage crisis, and declared one of the biggest bankruptcies in US history. At that time, the banking institution had over 2,200 branches, 43,000 employees, and total assets of approximately 307 billion with 188 billion in deposits.

This year brought to light numerous financial scandals, but one of the most famous remains the one associated with Bernie Madoff, Wall Street financier, who’s pyramid scam helped him steal millions of dollars from his investors over the years.

One year later, another economic pillar declared bankruptcy: General Motors, the first car manufacturer in the country. The Obama administration stepped in with a big cash injection to save the auto company and the millions of jobs tied to it.

Pictured: Fritz Henderson, CEO of General Motors

But financial crashes have occurred all over the world. Argentina was plunged into a devastating economic crisis at the start of 2002, when a deposit freeze, a default on public debt, and an abandonment of the fixed exchange rate led to high levels of unemployment, and political and social turmoil.

In France, Crédit Lyonnais, one of the pillars of the French banking system, was investigated by the French Banking Commission, which brought to light an overdraft of almost 200,000 francs and other fraudulent practices carried out by the top management of the banking institution.

The French bank entered virtual bankruptcy proceedings in 1993, largely due to large investments including those made through a Netherlands branch in Metro-Goldwyn-Mayer.

Pictured, Jean-Francois Rocchi, in charge of managing the bank’s debt.

In 1998, Russia experienced a very severe economic and monetary crisis. In fact, the collapse of the former Soviet country could only be avoided thanks to the intervention of the Central Bank of the United States.

Even the tourism sector hasn’t emerged unscathed from the changes in the market. One of the most glaring cases of financial crashes in this sector is represented by the British tour operator Thomas Cook, which closed its doors in 2019, due to its inability to cover a debt of almost 2 billion pounds.

In 2012, Spain found itself faced with a complicated situation which, without the intervention of the State and the European Union for around 18 billion euros, would have led to the bankruptcy of what at the time was one of the most important banks in the Iberian country, Bankia.

In the photo, Rodrigo Rato, former director of Bankia.

The banking institution recorded record losses due to the write-downs of mortgages and various credits, to which were later added several scandals for accounting fraud and embezzlement of the institution's top management.

In the photo, Rato being released from prison in 2020.

Not even China has been spared from financial practices capable of dealing a severe blow to the country's economy: this is the case of the bankruptcy of the real estate giant Evergrande, forced to deal with a debt of about 305 billion dollars with lenders, suppliers and investors .

In the photo, Pan Darong, CFO of Evergrande.

About 19 billion dollars (65 billion Brazilian reals), is the amount of debt that led the Brazilian telecommunications company Oi, one of the Top five in Latin America, to file for bankruptcy protection in 2016.

Fraudulent bankruptcy and insider trading: this is why Calisto Tanzi (pictured right), the founder of Parmalat, an Italian company dedicated to the milk and derivatives sector, was convicted.

Parlamat began to hide its losses in tax havens, even issuing false invoices. In just one month, from November to December 2003, the shares of the multinational collapsed. The debt contracted by Parlamat is approximately 150 million euros.

Among the biggest crashes for the Italian economy, is that of the agri-food giant Cirio. Between 1994 and 2002, the company’s debt went from 20% to 160%.

In the photo, Sergio Cragnotti, former manager of Cirio, escorted to prison in 2004.

To deal with this situation, the company issued the so called Cirio Bonds, which in just three years reached 1,125 billion euros. From debts with banks, Cirio then had debts with bondholders, forming a bubble that would soon explode.