Financial Crises Follow Patterns — But Not for Everyone

Here is the detail that Francis, a finance YouTuber whose channel Fin Tek recently published a 25-minute deep dive into the history of financial crises, slides past in a single subordinate clause: when the Great Depression hit, "perfectly healthy, profitable businesses had to fire everyone and let them go — not because the business failed, but because the bank holding their money had gambled it all away on the stock market."

One clause. Then the video moves on to Black Tuesday statistics.

That clause is where I live as a reporter. And it's worth slowing down there, because Francis's broader framework — four recurring patterns that precede every major financial crisis — is genuinely useful, and also genuinely incomplete in ways that matter depending on which side of the "crisis" you're standing on when it arrives.

The Framework Is Solid

Francis walks through four crises spanning three centuries: the South Sea and Mississippi Company collapses of 1720, the Panic of 1907, the Great Depression, and the 2008 financial crisis. His argument is that regardless of the specific circumstances, four patterns appear before each one: a major new financial innovation, that innovation spreading throughout the financial system, rising debt and leverage, and eventually a loss of confidence in institutions themselves.

It's a clean framework, and the historical case-building is careful enough to take seriously. The 1907 episode is particularly good. Trust companies — lightly regulated vehicles that could take on more risk than traditional banks and paid higher returns to depositors — became the dominant new financial innovation of the era. When two speculators tried to corner the copper market using loans from the Knickerbocker Trust Company, the failure cascaded through a system that had never been stress-tested. Call money rates — the short-term lending rates at the center of the panic — spiked to extraordinary levels on certain days, and lending effectively froze. What pulled the country back from the brink was JP Morgan literally locking bank presidents in a room until they agreed to use their own capital to bail out the failing trusts. The government looked at that arrangement and decided it was, to put it politely, not a sustainable crisis management strategy. The Federal Reserve followed.

The 1929 section lands the pattern argument well. The dot-com bust wiped out trillions of dollars and the NASDAQ fell nearly 80%, Francis notes, but it didn't become a Great Depression. Why? Because the financial sector wasn't deeply exposed to it. Banks weren't holding dot-com stocks as collateral. By contrast, in the 1920s, banks and lenders had become structurally dependent on the stock market never declining — debt stacked on debt stacked on debt, as Francis puts it. When prices dropped, the feedback loop didn't stay in the market. It moved into the real economy. That's his third pattern: financial sector spread. A stock market problem becomes everyone's problem once the banks are inside the bubble.

This is a real and important distinction. The framework holds up.

The Framework's Blind Spot

But here is what the framework describes as seen from above, and what it looks quite different from on the ground.

Francis notes that the NINJA loans — no income, no job, no assets, here's hundreds of thousands of dollars — were bundled up and sold to investors as safe bets. He calls it "greedy." The framing is accurate as far as it goes. What it doesn't address is who was on the receiving end of those loans.

The subprime mortgage market wasn't a neutral distribution of risk-seeking borrowers. It was heavily concentrated in Black and Latino communities, in first-generation homeowners, in people whose wages had been stagnant for two decades while housing prices climbed and whose best available path to wealth-building looked, for a moment, like it might be homeownership. Researchers and investigative journalists documented extensively how predatory lenders specifically targeted these communities — not because the borrowers were uniquely reckless, but because they were less likely to have the legal resources to fight back and more likely to accept terms that a more financially experienced borrower would have rejected. The debt being offered wasn't just financial product. For a lot of people, it was a substitute for the wage growth and retirement security that the economy had stopped delivering.

When the crisis hit, 6 million people lost their homes. The communities hit hardest were the ones that had been targeted hardest. Francis acknowledges the foreclosure wave and the human cost. He doesn't follow the money backward to ask why those particular loans were made to those particular people in those particular neighborhoods.

The "Patient Investor" Problem

Francis closes with advice that is sensible within its frame: don't try to time a crash, don't assume every new technology is a bubble, and recognize that crises, for those prepared and not forced to sell, have historically preceded some of the strongest market recoveries on record.

That last point is true. It is also a description of a mechanism by which wealth transfers from people who had no choice to people who did.

When housing prices collapsed in 2008 and 2009, millions of families — many of whom had been in their homes for years, many of whom were current on loans they'd held before the subprime wave — found themselves underwater, unable to refinance, facing foreclosure. Private equity firms and institutional investors, sitting on capital, swept in and bought those distressed properties at cents on the dollar. Between 2011 and 2017, institutional investors purchased hundreds of thousands of single-family homes in the hardest-hit markets and converted them to rentals. The families who lost those houses became renters. Sometimes renters of the same house they'd owned.

Francis isn't wrong that market recoveries create opportunities. The question his framework doesn't ask is: opportunities for whom, and at whose expense?

"For those who were prepared and not panicked," he says, the post-2008 recovery "created generational wealth as the market rose from the bottom."

The people who lost their houses in 2008 didn't lack preparation or courage. They lacked capital cushion — the thing that separates someone who can hold through a crisis from someone who is forced to sell into one. That's not a personality difference. It's a structural one, and financial crises tend to widen it, not close it.

What the Patterns Don't Explain

Francis's four-pattern framework describes the mechanics of how crises spread. It doesn't fully explain why the costs land where they land. The innovation in 2008 — mortgage-backed securities, CDOs, the financial instruments Francis characterizes as "an alphabet soup" — wasn't just a product. It was a system for originating risk in one community, packaging it beyond recognition, and selling it to pension funds and retirees who had no idea what they were holding. The upside concentrated at the origination end. The downside distributed everywhere, but not evenly.

There's a question Francis raises near the end that he doesn't quite push all the way: "Do you see signs that confidence in the system itself is starting to weaken?" He frames this as a warning sign to watch for. But from where I sit, the more interesting question is: who still has confidence in which systems, and why?

The workers who got laid off in 2009 from "perfectly healthy, profitable businesses" — because the bank holding the company's operating capital had gambled it on instruments none of them had ever heard of — didn't lose confidence in the stock market. Most of them weren't in the stock market in any meaningful way. They lost confidence in something else: the idea that economic stability was something the system was actually designed to provide for them.

Francis's framework is built for investors navigating risk. That's a legitimate thing to build. But financial crises are not primarily investor events. They are labor events, housing events, community-stability events that happen to start in financial markets. The four patterns explain why the crisis spreads. They don't fully explain who absorbs the landing.

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Carmen Rodriguez covers labor and workplace organizing for Buzzrag.