The functioning of repo, stock, loan, and derivatives markets seized as collateral values plunged and a panic over counterparty risk swept the financial system. Within days, other storied institutions either collapsed or were pushed to the brink. The seizure of the entire global financial system was a very real possibility.
The virulence of open global capital flows meant that the response, this time, had to be crafted in days, not decades. G-10 central banks, including the Bank of Canada, acted swiftly, by conducting a coordinated 50-basis-point interest rate cut.