Mortgage giants Fannie Mae and Freddie Mac were next to implode.
Suddenly the world was fixated on the fall of Wall Street. Lehman Brothers was not bailed out - creating a ripple worldwide with its many "counter parties" - and was soon driven into bankruptcy.
The Bank of America bought Merill Lynch in a transaction that is still being challenged.
On September 19, the Bush administration announced a $700bn bail-out plan to confront the crisis.
Ben Bernanke, the chairman of the Federal Reserve, would later privately say they acted to head off an imminent collapse - a new depression.
Publicly he was more restrained, saying: "If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse."
Initially, this was seen as simply a financial problem but it quickly became a social crisis too. States and cities began cutting back essential services as their tax bases contracted.
Markets plunge
Then the Dow fell 777.68 points, the largest one-day point drop in history.
The index experienced its largest one-day point loss ever after the House of Representatives voted down the government's proposed rescue plan.
By April 2008, the IMF projected a $945bn loss from the financial crisis. G7 ministers agreed to a new wave of financial regulation to combat a protracted downturn.
As a recession was officially recogized in the US, American consumers stopped trekking to the malls, sinking our consumption-based economy even further.
There was a ricochet effect worldwide - declines in growth were dramatic.
Banks in many countries which had bought into US real estate and asset-less sub-prime mortgages reported vast losses too.
It was like a deck of cards collapsing.
For the first quarter of 2009, the annualized rate of decline in GDP was 14.4 per cent in Germany, 15.2 per cent in Japan, 7.4 per cent in the UK, 9.8 per cent in the Euro area and 21.5 per cent for Mexico.
