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The 2008 crisis originated less in American subprime mortgages than in a North Atlantic banking system in which European banks borrowed short-term dollars in wholesale markets to buy US securities. The key imbalance was gross cross-border bank funding flows, not net trade deficits between the US and China.
When European and other foreign banks faced a dollar funding run, the Federal Reserve lent unlimited dollars to selected foreign central banks through swap lines, peaking at roughly $580 billion outstanding. This made the Fed the de facto lender of last resort to the world economy, and it was done largely out of public view without congressional authorization.
Instead of analyzing economies through national accounts and trade balances, trace the interlocking balance sheets of banks, including their gross assets, liabilities, and funding currencies. From this angle, financial contagion follows funding dependencies such as short-term repo and money-market dollar borrowing, not national borders.
The eurozone sovereign debt crisis was largely a banking crisis relabeled as a fiscal one. Governments and the ECB delayed bank recapitalization, imposed austerity on debtor states, and resisted full lender-of-last-resort action until Draghi's 2012 'whatever it takes' pledge. That delay turned a manageable problem into a prolonged depression in the periphery.
Crisis management relied on central banks and closed-door executive action that saved creditors and banks while ordinary households absorbed foreclosures, unemployment, and austerity. This gap between who was rescued and who paid eroded the legitimacy of centrist governance and fed Brexit, Trump, and European populism.
In September 2008 Paulson, Bernanke, and Geithner let Lehman Brothers fail and then, within days, bailed out AIG, whose counterparty payouts flowed heavily to European banks. The episode shows how crisis-fighters improvised case by case under legal constraints, and how the true beneficiaries of US rescues were often foreign institutions.