Subprime crisis impact timeline

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Main article: Subprime mortgage crisis

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v•d•e

The subprime crisis impact timeline lists dates relevant to the creation of a United States housing
bubble and the 2005 housing bubble burst (or market correction) and the subprime mortgage
crisiswhich developed during 2007 and 2008. It includes United States enactment of government laws
and regulations, as well as public and private actions which affected the housing industry and related
banking and investment activity. It also notes details of important incidents in the United States, such
as bankruptcies and takeovers, and information and statistics about relevant trends. For more
information on reverberations of this crisis throughout the global financial system see Financial crisis of
2007–2010 or Global financial crisis of September–October 2008.

Contents
[hide]
 • 1 1938–1989

• 2 1990 - 2000

• 3 2001-2006

• 4 2007

• 5 2008

o 5.1 2008 in general

o 5.2 January 2008 to August 2008

o 5.3 September 2008

o 5.4 October 2008

o 5.5 November 2008

o 5.6 December 2008

• 6 2009

• 7 2010

• 8 See also

• 9 References

• 10 Further reading

• 11 External links

[edit]1938–1989

 1938: The Federal National Mortgage Association, commonly known as Fannie Mae, is
established (as part of Franklin Delano Roosevelt's New Deal) to purchase and securitize
mortgages to ensure that funds are consistently available to the institutions that lend money to
home buyers.

 1968: Fannie Mae is converted from a federal government entity to a stand-alone government
sponsored enterprise (GSE) which purchases and securitizes mortgages to facilitate liquidity in the
primary mortgage market. The move takes the debt of Fannie Mae off of the books of the
government.

 1970: Federal Home Loan Mortgage Corporation (Freddie Mac) is created by an act of
Congress, as a government sponsored enterprise, to buy mortgages on the secondary market,
pool them, and sell them as mortgage-backed securities to investors on the open market; 1971 it
issues its first Mortgage Participation Certificate security.[1]
 1970s: Private companies begin mortgage asset securitization with the creation of private
mortgage pools in the 1970s.[2]

 1974: Equal Credit Opportunity Act imposes heavy sanctions for financial institutions found
guilty of discrimination on the basis of race, color, religion, national origin, sex, marital status, or
age[3]

 1977: Community Reinvestment Act is enacted to address historical discrimination in lending.

The Act encourages commercial banks and savings associations to meet the needs of borrowers
in all segments of their communities, including low- and moderate-income neighborhoods.[4][5]

 1980: The Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980
granted all thrifts, including savings and loan associations, the power to make consumer and
commercial loans and to issue transaction accounts and exempted federally chartered savings
banks, installment plan sellers and chartered loan companies from state usury (unlimited interest
rates) limits.[6]

 1981: Each of the 12 Federal Reserve banks establishes a Community Affairs Office to offer
public and private guidance in accordance with the Community Reinvestment Act.[7][8]

 1981: Salomon Brothers transitions from a private partnership to a public corporation, the first
of the Wall St. investment banks to do so. This shifts the risk of financial loss from the partners to
shareholders, arguably increasing the appetite for risk.[9]

 1982: Alternative Mortgage Transaction Parity Act of 1982 (AMTPA) preempts state laws
allows lenders to originate mortgages with features such as adjustable-rate mortgages, balloon
payments, and negative amortization and "allows lenders to make loans with terms that may
obscure the total cost of a loan".[10]

 1986: Tax Reform Act of 1986 (TRA) ended prohibited taxpayers from deducting interest on
consumer loans, such as credit cards and auto loans, while allowing them to deduct interest paid
on mortgage loans, providing an incentive for homeowners to take out home equity loans to pay
off consumer debt.[10] Household debt would grow from $705 billion at year end 1974, 60%
of disposable personal income, to $7.4 trillion at year end 2000, and finally to $14.5 trillion in
midyear 2008, 134% of disposable personal income.[11]

 1987 The mezzanine CDO was invented at Drexel Burnham Lambert; Credit Suisse develops
the mortgage-backed CDO in 2000.[9]

 1985–1989: The effects of Tax Reform Act of 1986, the elimination of Regulation Q which had
capped interest rates banks were allowed to pay, imprudent lending during the late 1970s
inflationary period, as well as other causes,[12] led to asset-liability mismatch for many Savings and
Loans.[13], This defacto insolvency led to the Savings and Loan Crisis and the failure and/or
 closure of half of all federally insured savings and loans. The number declined from 3,234 to
1,645.[14][15]

 1989-1995: Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA")

established the Resolution Trust Corporation (RTC) which closed hundreds of insolvent savings
and loans holding $519 billion in assets and moved regulatory authority to the Office of Thrift
Supervision (OTS). The U.S. government ultimately appropriated 105 billion dollars to resolve the
crisis. After banks repaid loans through various procedures, there was a net loss to taxpayers of
40 billion dollars by the end of 1999.[16]

[edit]1990 - 2000

 1992: Federal Housing Enterprises Financial Safety and Soundness Act of

1992 required Fannie Mae and Freddie Mac to devote a percentage of their lending to support
affordable housing increasing their pooling and selling of such loans as securities; Office of
Federal Housing Enterprise Oversight (OFHEO) created to oversee them[17][18]

 1993: The Federal Reserve Bank of Boston published "Closing the Gap: A Guide to Equal
Opportunity Lending" which recommended a series of measures to better serve low-income and
minority households, including loosening income thresholds for receiving a mortgage, influencing
government policy and housing activist demands on banks thereafter.[19][20]

 1994: Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA) repeals
the interstate provisions of the Bank Holding Company Act of 1956 that regulated the actions
of bank holding companies.

 1995: New Community Reinvestment Act regulations break down home-loan data by
neighborhood, income, and race, enabling community groups to complain to banks and regulators
about CRA compliance. Regulations also allows community groups that market loans to collect a
broker's fee.[21] Fannie Mae allowed to receive affordable housing credit for buying subprime
securities.[18]

 1995–2001: Dot-com bubble and collapse

 1997: Mortgage denial rate of 29 percent for conventional home purchase loans.[22] Investors
purchased more than $60 billion of subprime mortgage backed securities, six times more than
1991’s volume of $10 billion.[10] (private label securities, not GSE backed)

 July: The Taxpayer Relief Act of 1997 expanded the capital-gains exclusion to
$500,000 (per couple) from $125,000, encouraging people to invest in second homes and
investment properties.[23]
  November: Freddie Mac helped First Union Capital Markets and Bear Stearns &
Co launch the first publicly available securitization of CRA loans, issuing $384.6 million of
such securities. All carried a Freddie Mac guarantee as to timely interest and principal.[24]
[25]
First Union was not a subprime lender.[26]

 1998: Incipient housing bubble as inflation-adjusted home price appreciation exceeds 10%
per year in most West Coast metropolitan areas.[27]

 May: Brooksley Born and the Commodity Futures Trading Commission release a
report calling for regulation of Over the Counter Derivatives. Born says that non-transparent
trading could severely harm the economy. Alan Greenspan, Robert Rubin, and Arthur Levittof
president Clinton's Working Group on Financial Markets, and Larry Summers, fight against
her plan and convince congress and others to take no action.[28][29][30][31]

 October: "Financial Services Modernization Act" killed in Senate because of no

restrictions on Community Reinvestment Act-related community groups written into law[32]

 Federal Reserve Bank of New York rescues Long-Term Capital Management hedge
fund in 1998, which a Government Accountability Office critic said encouraged risky loans on
assumption government will bail out "too big to fail" banks and companies.[33]

 1998-2008: With increase in sales of mortgage-backed securities, companies buy more Credit
default swaps, unregulated insurance contracts used to protect debt holders; these increased 100-
fold from, with estimates of the debt covered by such contracts, as of November 2008, ranging
from $33 to $47 trillion.[34]

 1999:

 September: Fannie Mae eases the credit requirements to encourage banks to

extend home mortgages to individuals whose credit is not good enough to qualify for
conventional loans.[35]

 November: The Gramm-Leach-Bliley Act (or "Financial Services Modernization Act")

is signed by president Bill Clinton. It repeals theGlass-Steagall Act of 1933. It deregulates
banking, insurance, securities, and the financial services industry, allowing financial
institutions to grow very large. It also limits Community Reinvestment Coverage of smaller
banks and makes community groups report certain financial relationships with banks.
Congressmen key to the effort include Phil Gramm, Jim Leach, Thomas J. Bliley, Jr., Chuck
Schumer, and Chris Dodd.[32]

 2000: Lenders originating $160 billion worth of subprime, up from $40 billion in 1994. Fannie
Mae buys $600 million of subprime mortgages, primarily on a flow basis. Freddie Mac, in that
same year, purchases $18.6 billion worth of subprime loans, mostly Alt A and A- mortgages.
 Freddie Mac guarantees another $7.7 billion worth of subprime mortgages in structured
transactions.[10]

 October: Fannie Mae commits to purchase and securitize $2 billion of Community

Reinvestment Act eligible loans,[36][37]

 November: Fannie Mae announces that the Department of Housing and Urban
Development (“HUD”) will soon require it to dedicate 50% of its business to low- and
moderate-income families" and its goal is to finance over $500 billion in Community
Reinvestment Act related business by 2010.[38]

 December:Commodity Futures Modernization Act of 2000 defines interest rates,

currency prices, and stock indexes as "excluded commodities," allowing trade of credit-default
swaps by hedge funds, investment banks or insurance companies with minimal oversight[39],
and contributing to 2008 crisis in Bear Stearns & Co, Lehman Brothers, and AIG.[40][41][42]

[edit]2001-2006

 2000–2003: Early 2000s recession spurs government action to rev up economy.[citation needed]

 2000-2001: US Federal Reserve lowers Federal funds rate 11 times, from 6.5% (May 2000) to
1.75% (December 2001),[43] creating an easy-credit environment that fueled the growth of US
subprime mortgages.[44]

 2002-2006: Fannie Mae and Freddie Mac combined purchases of incorrectly rated AAA
subprime mortgage-backed securities rise from $38 billion to $90 billion per year.[45][46][47]

 Lenders began to offer loans to higher-risk borrowers,[48] Subprime mortgages

amounted to $600 billion (20%) by 2006.[49][50]

 Speculation in residential real estate rose. During 2005, 28% of homes purchased
were for investment purposes, with an additional 12% purchased as vacation homes. During
2006, these figures were 22% and 14%, respectively.[51] As many as 85% of condominium
properties purchased in Miami were for investment purposes which the owners resold
("flipped") without the seller ever having lived in them.[52]

 2002–2003: Mortgage denial rate of 14 percent for conventional home purchase loans, half of
1997.[22]

 2002: Annual home price appreciation of 10% or more in California, Florida, and most
Northeastern states.[53]

 June 17:President G.W. Bush sets goal of increasing minority home owners by at
least 5.5 million by 2010 through billions of dollars in tax credits, subsidies and a Fannie Mae
 commitment of $440 billion to establish NeighborWorks America with faith based
organizations.[54]

 2003: Federal Reserve Chair Alan Greenspan lowers federal reserve’s key interest rate to
1%, the lowest in 45 years.[55]

 August: Borio and White of Bank of International Settlements speak at the Jackson
Hole Economic Symposium, referencing BIS's "Credit Risk Transfer" 2003 report which
warned about problems with collateralized debt obligations and rating agencies. Their
arguments are rejected or ignored by attendees, including Alan Greenspan.[56]

 September: Bush administration recommend moving governmental supervision of

Fannie Mae and Freddie Mac under a new agency created within the Department of the
Treasury. The changes are blocked by Congress.[57]

 2003-2007: U.S. subprime mortgages increased 292%, from $332 billion to $1.3 trillion, due
primarily to the private sector entering the mortgage bond market, once an almost exclusive
domain of government sponsored enterprises like Freddie Mac.[58][59]

 The Federal Reserve fails to use its supervisory and regulatory authority over banks,
mortgage underwriters and other lenders, who abandoned loan standards (employment
history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-
servicing ability), emphasizing instead lender's ability to securitize and repackage subprime
loans.[39][60]

 2004-2007: Many financial institutions issued large amounts of debt and invested
in mortgage-backed securities (MBS), believing that house prices would continue to rise and that
households would keep up on mortgage payments.[61]

 2004: U.S. homeownership rate peaks with an all time high of 69.2 percent.[62]

 Following example of Countrywide Financial, the largest U.S. mortgage lender, many
lenders adopt automated loan approvals that critics argued were not subjected to appropriate
review and documentation according to good mortgage underwriting standards.[63] In 2007,
40% of all subprime loans resulted from automated underwriting.[64][65]Mortgage fraud by
borrowers increases.[66]

 HUD ratcheted up Fannie Mae and Freddie Mac affordable-housing goals for next
four years, from 50 percent to 56 percent, stating they lagged behind the private market; they
purchased $175 billion in 2004—44 percent of the market; from 2004 to 2006, they purchased
$434 billion in securities backed by subprime loans[18]

 October:SEC effectively suspends net capital rule for five firms—Goldman

Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns andMorgan Stanley. Freed from
 government imposed limits on the debt they can assume, they levered up 20, 30 and even 40
to 1, buying massive amounts of mortgage-backed securities and other risky investments.[67]

 2005:

 The Securities and Exchange Commission ceases an investigation of Bear

Stearns "pricing, valuation, and analysis" of mortgage-backed collateralized debt obligations.
No action is taken against Bear.[68]

 Robert Shiller gives talks warning about a housing bubble to the Office of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation. He is ignored,
and would later call it an incidence of Groupthink. That same year, his second edition of
"Irrational Exhuberance" warns that the housing bubble might lead to a worldwide
recession. [69]

 January:

 Federal Reserve Governor Edward Gramlich raises concerns over subprime

lending practices, says mortgage brokers might not have incentives for careful
underwriting and that that portion of the subprime industry was veering close to a
breakdown, that it's possible that it is a bubble but that the housing market did not qualify
for specific monetary policy treatment at this point[70].

 The Bank of International Settlements warns about the problems with

structured financial products, and points out the conflict of interest of credit rating
agencies - that they are being payed by the same companies they are supposed to be
objectively evaluating.[56]

 February: The Office of Thrift Supervision implements new rules that allow savings
and loans with over $1 billion in assets to meet their CRA obligations without investing in local
communities, cutting availability of subprime loans.[71]

 June: The International Swaps and Derivatives Association enables credit default
swaps (quasi-insurance contracts) to be taken out against asset-backed-
security collateralized debt obligations (including ones backed by subprime mortgages).[72]

 August: Raghuram Rajan delivers his paper "Has Financial Development Made the
World Riskier?", warning about credit default swaps, at the Jackson Hole Economic
Symposium. His arguments are rejected by attendees, including Alan Greenspan, Donald
Kohn, and Lawrence Summers.[73][74]

 September: The Mortgage Insurance Companies of America send a letter to

the Federal Reserve, warning about 'risky lending practices' in US real estate.[56]

 Fall 2005: Booming housing market halts abruptly; from the fourth quarter of 2005 to
the first quarter of 2006, median prices nationwide drop 3.3 percent.[75]
  2006:

 May: The subprime lender Ameriquest announces it will cut 3,800 Jobs, close its 229
retail branches and rely instead on the Web[76]

 May: Merit Financial Inc, based in Kirkland, Washington, files for bankruptcy and
closes its doors, firing all but 80 of its 410 employees; Merit’s marketplace decline about 40%
and sales are not bringing in enough revenue to support overhead.[55]

 August: U.S. Home Construction Index is down over 40% as of mid-August 2006
compared to a year earlier.[77]

 September 7: Nouriel Roubini warns the International Monetary Fund about a

coming US housing bust, mortgage-backed securities failures, bank failures, and a recession.
His work was based partly on his study of recent economic crises in Russia (1998), Argentina
(2000), Mexico (1994), and Asia (1997) [78]

 Fall 2006 J.P. Morgan CEO Jamie Dimon directs the firm to reduce its exposure to
subprime mortgages.[9]

 December 2006 Goldman-Sachs claims after the fact that it began reducing its
exposure to subprime mortgages at this point. It also begins increasing its short positions.
Others claim these risk decisions were made in the spring and summer 2007.[9]

[edit]2007

See also: Financial crisis of 2007–2010, List of writedowns due to subprime crisis, and List of bankrupt
or acquired banks during the subprime mortgage crisis

Home sales continue to fall. The plunge in existing-home sales is the steepest since 1989. In
Q1/2007, S&P/Case-Shiller house price indexrecords first year-over-year decline in nationwide house
prices since 1991.[79] The subprime mortgage industry collapses, and a surge of foreclosure activity
(twice as bad as 2006)[80] and rising interest rates threaten to depress prices further as problems in the
subprime markets spread to the near-prime and prime mortgage markets.[81]

 January 3: Ownit Mortgage Solutions Inc. files for Chapter 11. Records show that
Ownit Mortgage Solutions owed Merrill Lynch around $93 million at the time of filing.[55]

 February 5: Mortgage Lenders Network USA Inc., the country's 15th largest
subprime lender with $3.3 billion in loans funded in third quarter 2006, files for Chapter 11.[55]

 February–March: Subprime industry collapse; several subprime lenders

declaring bankruptcy, announcing significant losses, or putting themselves up for sale.
[82]
These include Accredited Home Lenders Holding, New Century Financial, DR
Horton andCountrywide Financial [83]

 March: The value of USA subprime mortgages was estimated at $1.3 trillion as of
March 2007.[84]

 March 6: In a speech before the Independent Community Bankers of America's

Annual Convention and Techworld, Honolulu, Hawaii,Ben Bernanke, quoting Alan Greenspan,
warns that the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac,
were a source of "systemic risk" and suggest legislation to head off a possible crisis[85]

 April 2: New Century Financial, largest U.S. subprime lender, files for chapter 11
bankruptcy.[86]

 April 3: According to CNN Money, business sources report lenders made $640 billion
in subprime loans in 2006, nearly twice the level 3 years earlier; subprime loans amounted to
about 20 percent of the nation's mortgage lending and about 17 percent of home purchases;
financial firms and hedge funds likely own more than $1 trillion in securities backed by
subprime mortgage; about 13 percent of subprime loans are now delinquent, more than five
times the delinquency rate for home loans to borrowers with top credit; more than 2 percent of
subprime loans had foreclosure proceedings start in the fourth quarter.[86]

 April 18: Freddie Mac fined $3.8 million by the Federal Election Commission as a
result of illegal campaign contributions, much of it to members of the United States House
Committee on Financial Services which oversees Freddie Mac.[87]

 June 7: Bear Stearns & Co informs investors in two of its funds, the High-Grade
Structured Credit Strategies Enhanced Leverage Fund and the High-Grade Structured Credit
Fund that it was halting redemptions.[88]

 June 20: Merrill Lynch seized $800 million in assets from two Bear Stearns hedge
funds that were involved in securities backed by subprime loans.[89].

 June 25: FDIC Chair Shelia Bair cautioned against the more flexible risk
management standards of the Basel II international accord and lowering bank capital
requirements generally: "There are strong reasons for believing that banks left to their own
devices would maintain less capital -- not more -- than would be prudent. The fact is, banks do
benefit from implicit and explicit government safety nets...In short, regulators can't leave
capital decisions totally to the banks."[90]

 July 19: Dow Jones Industrial Average closes above 14,000 for the first time in its
[91]
history.

 August: worldwide "credit crunch" as subprime mortgage backed securities are

discovered in portfolios of banks and hedge funds around the world, from BNP
Paribas to Bank of China. Many lenders stop offering home equity loans and "stated income"
loans.Federal Reserve injects about $100 billion into the money supply for banks to borrow at
a low rate.[citation needed]

 August 6:American Home Mortgage Investment Corporation (AHMI) files Chapter 11

bankruptcy. The company expects to see up to a $60 million loss for the first quarter 2007[92].

 August 7: Numerous quantitative long/short equity hedge funds suddenly begin

experiencing unprecedented losses as a result of what is believed to be liquidations by some
managers eager to access cash during the liquidity crisis. It highlights one of the first
examples of the contagion effect of the subprime crisis spilling over into a radically different
business area.[93].

 August 8: Mortgage Guaranty Insurance Corporation (MGIC, Milwaukee, Wisconsin)

announces it will discontinue its purchase ofRadian Group [94] after suffering a billion-dollar
loss[95] of its investment in Credit-Based Asset Servicing and Securitization (C-BASS, New
York]).[96]

 August 9: French investment bank BNP Paribas suspends three investment funds
that invested in subprime mortgage debt[97], due to a "complete evaporation of liquidity" [98] in
the market. The bank's announcement is the first of many credit-loss and write-down
announcements by banks, mortgage lenders and other institutional investors, as subprime
assets went bad, due to defaults by subprime mortgage payers.[99] This announcement
compels the intervention of the European Central Bank, pumping 95 billion euros into the
European banking market.[100][101]

 August 10: Central banks coordinate efforts to increase liquidity for first time since
the aftermath of the September 11, 2001 terrorist attacks.[102] The United States Federal
Reserve (Fed) injects a combined 43 billion USD, the European Central Bank (ECB) 156
billion euros (214.6 billion USD), and the Bank of Japan 1 trillion Yen (8.4 billion USD).
Smaller amounts come from the central banks ofAustralia, and Canada.[102]

 August 14: Sentinel Management Group suspends redemptions for investors and
sells off $312 million worth of assets; three days later Sentinel files for Chapter 11 bankruptcy
protection.[103] US and European stock indices continue to fall.[104]

 August 15: The stock of Countrywide Financial, which is the largest mortgage lender
in the United States, falls around 13% on theNew York Stock Exchange after Countrywide
says foreclosures and mortgage delinquencies have risen to their highest levels since early
2002.[105]
 August 16: Countrywide Financial Corporation, the biggest U.S. mortgage lender,
narrowly avoids bankruptcy by taking out an emergency loan of $11 billion from a group of
banks.[106]

 August 17: the Federal Reserve cuts the discount rate by half a percent to 5.75%
from 6.25% while leaving the federal funds rateunchanged in an attempt to stabilize financial
markets.[107]

 August 31: President Bush announces a limited bailout of U.S. homeowners unable
to pay the rising costs of their debts.[108]Ameriquest, once the largest subprime lender in the
U.S., goes out of business;[109]

 September 1–3: Fed Economic Symposium in Jackson Hole, WY addressed the

housing recession that jeopardizes U.S. growth. Several critics argue that the Fed should use
regulation and interest rates to prevent asset-price bubbles,[110] blamed former Fed-
chairman Alan Greenspan's low interest rate policies for stoking the U.S. housing boom and
subsequent bust [111], and Yale University economist Robert Shiller warned of possible home
price declines of fifty percent.[112]

 September 4: The Libor rate rises to its highest level since December 1998, at
6.7975%, above the Bank of England's 5.75% base rate.[113][114]

 September 6: the Federal Reserve adds $31.25 billion in temporary reserves (loans)
to the US money markets which has to be repaid in two weeks.[115]

 September 7: US Labor Department announces that non-farm payrolls fell by 4,000

in August 2007, the first month of negative job growth since August 2003, due in large part to
problems in the housing and credit markets.[116]

 September 17: Former Fed Chairman Alan Greenspan said "we had a bubble in
housing" [117] and warns of "large double digit declines" in home values "larger than most
people expect."

 September 18: The Fed lowers interest rates by half a point (0.5%) in an attempt to
limit damage to the economy from the housing and credit crises.[118]

 September 28: Television finance personality Jim Cramer warns Americans on The
Today Show, "don't you dare buy a home—you'll lose money," causing a furor
among Realtors.[119]

 September 30: Affected by the spiraling mortgage and credit crises, Internet banking
pioneer NetBank goes bankrupt [120], and the Swiss bank UBS announces that it lost US$690
million in the third quarter.[121]
  October 5: Merrill Lynch announces a US$5.5 billion loss as a consequence of the
subprime crisis, which is revised to $8.4 billion on October 24, a sum that credit rating
firm Standard & Poor's called "startling".[122]

 October 10: Hope Now Alliance is created by the US Government and private
industry to help some sub-prime borrowers.[123]

 October 15–17: A consortium of U.S. banks backed by the U.S. government

announces a "super fund" of $100 billion to purchasemortgage-backed
securities whose mark-to-market value plummeted in the subprime collapse.[124] Both Fed
chairman Ben Bernanke and Treasury Secretary Hank Paulson express alarm about the
dangers posed by the bursting housing bubble; Paulson says "the housing decline is still
unfolding and I view it as the most significant risk to our economy. … The longer housing
prices remain stagnant or fall, the greater the penalty to our future economic growth."[125]

 October 31: Federal Reserve lowers the federal funds rate by 25 basis points to
4.5%.

 November 1: Federal Reserve injects $41B into the money supply for banks to
borrow at a low rate. The largest single expansion by the Fed since $50.35B on September
19, 2001.

 November 15: Financial Accounting Standards Board "Fair Value Measurements"

standards upgrade the quality of financial reporting through greater transparency.[126]
[127]
However, this "mark-to-market" accounting may exaggerate the loss in value of an asset,
as shown on balance sheets, and trigger a cascade of unnecessary financial losses.[128]

 December 6: President Bush announces a plan to voluntarily and temporarily freeze

the mortgages of a limited number of mortgage debtors holding adjustable rate mortgages
(ARM). He also asked Members Of Congress to: 1. pass legislation to modernize the FHA. 2.
temporarily reform the tax code to help homeowners refinance during this time of housing
market stress. 3. pass funding to support mortgage counseling. 4. pass legislation to reform
Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae.[129].

 December 24: A consortium of banks officially abandons the U.S. government-

supported "super-SIV" mortgage crisis bail-out plan announced in mid-October,[130] citing a
lack of demand for the risky mortgage products on which the plan was based, and widespread
criticism that the fund was a flawed idea that would have been difficult to execute.[130]

[edit]2008

[edit]2008 in general
Starting in late 2007, and throughout 2008, the 'monoline' municipal bond insurance companies, such
as AMBAC, MBIA, and ACA, have theircredit ratings downgraded by the credit rating
agencies because they had also gotten 'insurance' policies (via credit default swaps) on mortgage-
based CDOs. Since the entire 'municipal bond insurance' business model depends on the insurer
having a very high credit rating, these companies begin to collapse, and the value of many of the
bonds they insured also falls.[131][132][133][134][135]

[edit]January 2008 to August 2008

The New York City headquarters of Lehman Brothers.

See also: Financial crisis of 2007–2010, List of writedowns due to subprime crisis, and List of bankrupt
or acquired banks during the subprime mortgage crisis

Financial crisis escalates with collapse of major lenders and investors.

 January 2–21: January 2008 stock market downturn.

 January 24: The National Association of Realtors (NAR) announces that 2007 had
the largest drop in existing home sales in 25 years,[136] and "the first price decline in many,
many years and possibly going back to the Great Depression."[137]

 March 1–June 18: 406 people are arrested for mortgage fraud in an FBI sting across
the U.S., including buyers, sellers and others across the wide-ranging mortgage industry.[138]

 March 10: Dow Jones Industrial Average at the lowest level since October 2006,
falling more than 20% from its peak just five months prior.

 March 14: Bear Stearns gets Fed funding as shares plummet.[139]

  March 16: Bear Stearns is acquired for $2 a share by JPMorgan Chase in a fire sale
avoiding bankruptcy. The deal is backed by the Federal Reserve, providing up to $30B to
cover possible Bear Stearn losses.[140]

 May 6: UBS AG Swiss bank announces plans to cut 5500 jobs by the middle of 2009.
[141]

 June 18: As the chairman of the Senate Banking

Committee Connecticut's Christopher Dodd proposes a housing bailout to the Senate floor
that would assist troubled subprime mortgage lenders such as Countrywide Bank, Dodd
admitted that he received special treatment, perks, and campaign donations
fromCountrywide, who regarded Dodd as a "special" customer and a "Friend of Angelo." Dodd
received a $75,000 reduction in mortgage payments from Countrywide.[142][143] The Chairman
of the Senate Finance Committee Kent Conrad and the head of head of Fannie Mae Jim
Johnson also received mortgages on favorable terms due to their association with
Countrywide CEO Angelo R. Mozilo.[142][144]

 June 19: Ex-Bear Stearns fund managers arrested by the FBI for their allegedly
fraudulent role in the subprime mortgage collapse. The managers purportedly misrepresented
the fiscal health of their funds to investors publicly while privately withdrawing their own
money.[145]

 July 11 Indymac Bank, a subsidiary of Independent National Mortgage Corporation

(Indymac), is placed into the receivership of theFDIC by the Office of Thrift Supervision. It was
the fourth-largest bank failure in United States history,[146] and the second-largest failure of a
regulated thrift.[147][148]. Before its failure, IndyMac Bank was the largest savings and loan
association in the Los Angeles area and the seventh-largest mortgage originator in the United
States.[149]

 July 17: Major banks and financial institutions had borrowed and invested heavily in
mortgage backed securities and reported losses of approximately $435 billion as of 17 July
2008.[150]

 July 30: President Bush signs into law the Housing and Economic Recovery Act of
2008, which authorizes the Federal Housing Administration to guarantee up to $300 billion in
new 30-year fixed rate mortgages for subprime borrowers if lenders write-down principal loan
balances to 90 percent of current appraisal value.

[edit]September 2008
Main article: Global financial crisis in September 2008


  September 7: Federal takeover of Fannie Mae and Freddie Mac, which at that point
owned or guaranteed about half of the U.S.'s $12 trillion mortgage market, effectively
nationalizing them. This causes panic because almost every home mortgage lender and Wall
Street bank relied on them to facilitate the mortgage market and investors worldwide owned
$5.2 trillion of debt securities backed by them.[151][152]

 September 14: Merrill Lynch is sold to Bank of America amidst fears of a liquidity
crisis and Lehman Brothers collapse[153]

 September 15: Lehman Brothers files for bankruptcy protection[154]

 September 16: Moody's and Standard and Poor's downgrade ratings on AIG's credit
on concerns over continuing losses to mortgage-backed securities, sending the company into
fears of insolvency.[155][156] In addition, the Reserve Primary Fund "breaks the buck" leading to
a run on the money market funds. Over $140 billion is withdrawn vs. $7 billion the week prior.
This leads to problems for the commercial paper market, a key source of funding for
corporations, which suddenly could not get funds or had to pay much higher interest rates.[157]

 September 17: The US Federal Reserve lends $85 billion to American International
Group (AIG) to avoid bankruptcy.

 September 18: Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke
meet with key legislators to propose a $700 billion emergency bailout through the purchase of
toxic assets. Bernanke tells them: "If we don't do this, we may not have an economy on
Monday."[158]

 September 19: Paulson financial rescue plan is unveiled after a volatile week in
stock and debt markets.

 September 23: The FBI discloses that it had been investigating the possibility of
fraud by mortgage financing companies Fannie Maeand Freddie Mac, Lehman Brothers, and
insurer American International Group, bringing to 26 the number of corporate lenders under
investigation.[159]

 September 25: Washington Mutual is seized by the Federal Deposit Insurance

Corporation, and its banking assets are sold to JP MorganChase for $1.9 billion.

 September 29: Emergency Economic Stabilization Act is defeated 228-205 in

the United States House of Representatives; Federal Deposit Insurance
Corporation announces that Citigroup Inc. would acquire banking operations of Wachovia.[160]

 September 30: US Treasury changes tax law to allow a bank acquiring another to
write off all of the acquired bank's losses for tax purposes [161]

[edit]October 2008
Main article: Global financial crisis in October 2008

 October 1: The U.S. Senate passes HR1424, their version of the $700 billion bailout
[162]
bill. .

 October 1: The financial crisis spreads to Europe.[163][164]

 October 3: President George W. Bush signs the Emergency Economic Stabilization

Act, creating a $700 billion Troubled Assets Relief Program to purchase failing bank assets.
[165]
It contains also easing of the accounting rules that forced companies to collapse because
of the existence of toxic mortgage-related investments.[166] Also key to winning GOP support
was a decision by the Securities and Exchange Commission to ease mark-to-
market accounting rules that require financial institutions to show the deflated value of assets
on their balance sheets."[127][167]

 October 3: Using tax law change made September 30, Wells makes a higher offer
for Wachovia, scooping it from Citigroup [168]

 October 6–10: Worst week for the stock market in 75 years. The Dow Jones loses
22.1 percent, its worst week on record, down 40.3 percent since reaching a record high of
14,164.53 October 9, 2007. The Standard & Poor's 500 index loses 18.2 percent, its worst
week since 1933, down 42.5 percent in since its own high October 9, 2007.[169]

 October 6: Fed announces that it will provide $900 billion in short-term cash loans to
banks.[170]

 October 7: Fed makes emergency move to lend around $1.3 trillion directly to
companies outside the financial sector.[171]

 October 7: The Internal Revenue Service (IRS) relaxes rules on US corporations

repatriating money held oversees in an attempt to inject liquidity into the US financial market.
The new ruling allows the companies to receive loans from their foreign subsidiaries for longer
periods and more times a year without triggering the 35% corporate income tax.[55]

 October 8: Central banks in USA (Fed), England, China, Canada, Sweden,

Switzerland and the European Central Bank cut rates in a coordinated effort to aid world
economy.[172]

 October 8: Fed also reduces its emergency lending rate to banks by half a
percentage point, to 1.75 percent.[173]

 October 8: White House considers taking ownership stakes in private banks as a

part of the bailout bill.[174] Warren Buffett andGeorge Soros criticized the original approach of
the bailout bill.[175][176]
  October 11: The Dow Jones Industrial Average caps its worst week ever with its
highest volatility day ever recorded in its 112 year history. Over the last eight trading days, the
DJIA has dropped 22% amid worries of worsening credit crisis and global recession. Paper
losses now on US stocks now total $8.4 trillion from the market highs last year.[55]

 October 11: The G7, a group of central bankers and finance ministers from the
Group of Seven leading economies, meet in Washington and agree to urgent and exceptional
coordinated action to prevent the credit crisis from throwing the world into depression. The G7
did not agree on the concrete plan that was hoped for.[55]

 October 14: The US taps into the $700 billion available from the Emergency
Economic Stabilization Act and announces the injection of $250 billion of public money into
the US banking system. The form of the rescue will include the US government taking an
equity position in banks that choose to participate in the program in exchange for certain
restrictions such as executive compensation. Nine banks agreed to participate in the program
and will receive half of the total funds: 1) Bank of America, 2) JPMorgan Chase, 3) Wells
Fargo, 4) Citigroup, 5) Merrill Lynch, 6) Goldman Sachs, 7) Morgan Stanley, 8) Bank of New
York Mellon and 9) State Street. Other US financial institutions eligible for the plan have until
November 14 to agree to the terms.[55]

 October 21: The US Federal Reserve announces that it will spend $540 billion to
purchase short-term debt from money market mutual funds. The large amount of redemption
requests during the credit crisis have caused the money market funds to scale back lending to
banks contributing to the credit freeze on interbank lending markets. This government is
hoping the injection will help unfreeze the credit markets making it easier for businesses and
banks to obtain loans. The structure of the plan involves the Fed setting up four special
purpose vehicles that will purchase the assets.[55]

[edit]November 2008
Main article: Global financial crisis in November 2008

 November 12: Treasury Secretary Paulson abandons plan to buy toxic assets under
the $700 billion Troubled Asset Relief Program (TARP). Mr. Paulson said the remaining $410
billion in the fund would be better spent on recapitalizing financial companies.[55]

 November 15: The group of 20 of the world’s largest economies meets in

Washington DC and releases a statement of the meeting. Although no detailed plans were
agreed upon, the meeting focused on implementing policies consistent with five principles:
 strengthening transparency and accountability, improving regulation, promoting market
integrity, reinforcing cooperation and reforming international institutions.[55]

 November 17: The Treasury gives out $33.6 billion to 21 banks in the second round
of disbursements from the $700 billion bailout fund. This payout brings the total to $158.56
billion so far.[177]

 November 24: The US government agrees to rescue Citigroup after an attack by

investors causes the stock price to plummet 60% over the last week under a detailed plan that
including injecting another $20 billion of capital into Citigroup bringing the total infusion to $45
billion.[177]

 November 25: The US Federal Reserve pledges $800 billion more to help revive the
financial system. $600 billion will be used to buy mortgage bonds issued or guaranteed by
Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.[177]

 November 28: The Bank for International Settlements (BIS), the global organization
behind the Basel Accord, issues a consultative paper providing supervisory guidance on the
valuation of assets. The paper provides ten principles that should be used by banks to value
assets at fair market value.[177]

[edit]December 2008
Main article: Global financial crisis in December 2008
[edit]2009

Main article: Global financial crisis in 2009

[edit]2010

 April 16: The Securities and Exchange Commission sues Goldman Sachs for fraud, for
allegedly having failed to disclose vital information to investors in one of its "Abacus" mortgage-
backed CDOs in 2007. The CDO was allegedly 'designed to fail' by the hedge fund of John
Paulson, so that Paulson could make large profits by betting against it. Allegedly this was not
disclosed to investors by Goldman, and they lost roughly a billion dollars, while Paulson & Co
profited.[178][179]