Divergence Point: September 14, 2008. Treasury Secretary Paulson agrees to a $30 billion backstop for Barclays to acquire Lehman Brothers, citing "systemic risk" over "moral hazard".
Markets rallied 4% on the news. The Reserve Primary Fund did not break the buck. The commercial paper market remained liquid. However, the underlying toxic assets (subprime mortgages) remained on balance sheets across the street.
Without the cleansing fire of a crisis, strict banking regulations (Dodd-Frank equivalent) were never passed. Leverage ratios remained high. By 2011, a larger, more systemic sovereign debt crisis emerged, centering on US Treasuries themselves rather than just mortgage-backed securities.
The index avoided the 2008 crash low of 666, bottoming instead at 1,100 in 2009. However, growth remained anemia (1.2% GDP) for a decade due to debt overhang.