(Msg originally written in response to @Magaly in Volkswagen Scenarios)
I have to admit i am not 100% aware of all the details of the 2007-2008 financial crisis.
As an example, i just had to look up why different banks failed.
Apparently, Bear Sterns , Lehman brothers, Citibank, Merrill Lynch and others collateralized mortgage-backed securities with collateralized debt obligations, while AIG sold a lot of credit default swaps.
Similarly, I am not aware of the magnitude of balance sheets from different players and the impact of the failure of different players on the financial system.
Therefore it’s hard for me to say if there has been a sudden shock to the financial system but my assumption is that financial markets completely collapsed in mid-September 2008 at the time when Lehman went bankrupt and large support measures like a 138billion advance to Lehman Brothers by J.P Morgan or a 700billion capital injection program of the treasury had been taken.
Given that the treasury recovered all its money it appears that the fundamental situation of most u.s. banks has been alright even as they suffered large losses from mortgage-backed securities and a potential shock to the system has been caused in part or mainly by an erosion of trust between banks and distressed asset valuations.
When it comes to a potential shock on the real economy which is more relevant for e.g. Volkswagen we have to look into the impact of the financial crisis on lending activities as an example for automotive loans. My assumption here is that both the declining value of real estate prices as well as tightening lending standards led to a sharp and potentially sudden drop of lending which combined with the larger uncertainty in the economy caused automotive demand to drop drastically.