These concerns soon embraced a very wide sweep of financial products in the US and elsewhere. Bear Stearns was effectively bailed out by the US taxpayer on the basis that it was too interconnected to be allowed to fail.
But the shock bankruptcy of Lehman Brothers in September 2008 saw investors panic, as perceptions about the safety of financial institutions in general took a sudden turn for the worse. Each of these events saw funding spreads in interbank markets worldwide spike (Figure 1). Firms, investors and regulators generally failed to anticipate quite how financial system fragilities could interact.