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Stuart Varney of FOX Business Network and the Lessons of the 2008 Financial Crisis

Luis Hernandez

FOX Business Network Anchor Stuart Varney was reporting from Wall Street during the thick of the 2008 financial crisis. As the investing world marks 10 years since those events unfolded, InvestorPlace asked him about his memories of that time and to provide his take on what investors should have learned from those dark days.

It’s easy to forget all the key events that occurred in September 2008 as the full extent of the crisis became apparent.

Early in September, Fannie Mae and Freddie Mac were taken over by the government.

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On Sept. 15, Lehman Brothers filed for bankruptcy and on the 16th, AIG (NYSE:AIG), the world’s largest insurer, accepted an $85 billion federal bailout that gave the government an 80% stake in the company.

On Sept. 21, Goldman Sachs and Morgan Stanley, the last two independent investment banks became bank holding companies subject to greater regulation by the Federal Reserve.

On the 25th, Federal regulators closed Washington Mutual Bank in the biggest U.S. bank failure in history. All its assets were sold to JPMorgan Chase.

And the bad news kept coming.

Stuart Varney’s Take on the Financial Crisis

On Sept. 29, the Dow Jones Industrial Average fell 778 points, its biggest single-day drop, after Congress rejected a $700 billion rescue package – the Troubled Asset Relief Program. Congress eventually approved the program on Oct. 3.

Varney was on the air live with his FOX Business Network colleagues every day during the crisis, trying hard to keep track of all the developments and the significance of each.

“Few experts at the time truly understood what was going on and where the crisis was leading. It was not clear how bad it was until after the Lehman Brothers collapse,” Varney recalls.

For someone covering it live on the street, it’s easy to recall the atmosphere. “The mood was panic!” said Varney. “It was the first time that I’ve ever actually been in the middle of and reported on a financial panic.”

Panic was certainly reflected in the behavior of retail investors as they watched their investment portfolios and 401(k) balances shrink, with seemingly no end in sight. “What so many investors did wrong was to sell because they were panicked,” says Varney. It’s difficult to stick to an investment plan in the face of such dramatic bad news.

And in some ways, the market hasn’t fully recovered. Even now, in the middle of the biggest bull market in history, stock market participation rates have not caught up to pre-2008 levels – another big mistake. “So many people sold and stayed out of the market and therefore missed the dramatic rebound that started in March 2009,” Varney said.

This leads Varney to his single biggest piece of advice about how to manage these crises: “Do not panic!”

Are there conditions in the market now that resemble what was happening then? “The big problem that remains with us today is one of excessive debt. Especially on the part of governments. Whether it is state governments or national governments, the level of debt is much higher than it was before the crisis.”

Sadly, Varney has no doubt we have not seen the last financial crisis. “There will be other crashes and panics still to come. It is the nature of capitalism. There are always ups and downs. There are always scares. As long as you have a capitalist system you cannot avoid them. And until they come up with a better system, capitalism is the best one we’ve got panics and crashes notwithstanding.”

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