- Subprime crisis impact timeline
The subprime crisis impact timeline includes government laws, regulations and entities and their effect on private institutions; information and statistics about governmental and private activities and trends; and details of important incidents, such as bankruptcies and takeovers, all relevant to the
United States housing bubble, the 2005 housing bubble burst (or market correction) and the subprime mortgage crisiswhich developed thereafter.
1968 - 1989
*1968: The Government mortgage-related agency, Federal National Mortgage Association (
Fannie Mae) is converted from a federal government entity to a stand-alone government sponsored enterprisewhich 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 GSE, to buy mortgages on the secondary market, pool them, and sell them as mortgage-backed securities to investors on the open market
Equal Credit Opportunity Actimposes heavy sanctions for financial institutions found guilty of discrimination on the basis of race, color, religion, national origin, sex, marital status, or age
Community Reinvestment Actpassed to require banksand savings and loan associations to offer credit to lower income individuals and small businesses USC|12|2901 "et seq.") [ [http://www.fdic.gov/regulations/laws/rules/6500-2515.html Text of Housing and Community Development Act of 1977—title Viii (Community Reinvestment)] .] cite web|url=http://www.federalreserve.gov/dcca/cra/|title=Community Reinvestment Act|publisher=Federal Reserve|accessdate=2008-10-05]
Depository Institutions Deregulation and Monetary Control Actof 1980 granted all thrifts, including savings and loan associations, the power to make consumer and commercial loans and to issue transaction accounts, but with little regulatory oversight of competing banks; also exempted federally chartered savings banks, installment plan sellers and chartered loan companies from state usurylimits. [ [http://www.fdic.gov/bank/analytical/bank/bt_9805.html The Effect of Consumer Interest Rate Deregulation on Credit Card Volumes, Charge-Offs, and the Personal Bankruptcy Rate] , Federal Deposit Insurance Corporation"Bank Trends" Newsletter, March, 1998.]
*1981: Each Federal Reserve bank establishes a Community Affairs Office to ensure compliance with Community Reinvestment Act. [cite web|url=http://www.stlouisfed.org/community/about_cra.html |title=The Community Reinvestment Act |publisher=Federal Reserve Bank of St. Louis |accessdate=2008-10-06 ] cite web|url=http://www.ffiec.gov/cra/history.htm|title=Community Reinvestment Act: Background & Purpose |publisher=FFIEC|accessdate=2008-10-06]
Savings and Loan Crisiscaused by rising interest rates and over development in the commercial real estate sector, and exacerbated by deregulation of savings and loan lending standards and a reduction in capital reserve requirements from 5% to 3%.Fact|date=October 2008
*1986–1991: New homes constructed dropped from 1.8 to 1 million, the lowest rated since World War II. [cite web |title=Housing Finance in Developed Countries An International Comparison of Efficiency, United States |url=http://www.fanniemaefoundation.org/programs/jhr/pdf/jhr_0301_ch6_USA.pdf |year=1992 |publisher=Fannie Mae ]
Financial Institutions Reform, Recovery and Enforcement Act("FIRREA") enacted which established the Resolution Trust Corporation(RTC), closing hundreds of insolvent thrifts and moved regulatory authority to the Office of Thrift Supervision(OTS); required federal agencies to issue Community Reinvestment Act ratings publiclycite journal|last=Westhoff |first=Dale |date=1998-05-01 |title=Packaging CRA loans into securities.|journal=Mortgage Banking |issue=May 1998 |url=http://www.allbusiness.com/personal-finance/real-estate-mortgage-loans/677967-1.html|doi=10.1016/j.jhsb.2004.02.009|volume=29|pages=315]
Federal Housing Enterprises Financial Safety and Soundness Act of 1992required Fannie Maeand Freddie Macto 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 themBen S. Bernanke, Chair of Federal Reserve System, [http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm The Community Reinvestment Act: Its Evolution and New Challenges] , speech at the Community Affairs Research Conference, Washington, D.C., Federal Reserve Systemwebsite, March 30, 2007.] cite news|url=http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html| title=How HUD Mortgage Policy Fed The Crisis|first=Carol D. |last=Leonnig|date= June 10, 2008 A1|publisher= Washington Post]
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994(IBBEA) repeals the interstate provisions of the Bank Holding Company Act of 1956that regulated the actions of bank holding companies.
Community Reinvestment Actregulations break down home-loan data by neighborhood, income, and race; encourage community groups to complain to banks and regulators by allowing community groups that marketed loans to collect a brokers feeSandra F. Braunstein, Director, Division of Consumer and Community Affairs, [http://www.federalreserve.gov/newsevents/testimony/braunstein20080213a.htm The Community Reinvestment Act] , Testimony Before the Committee on Financial Services, U.S. House of Representatives, 13 February 2008.] ; Fannie Mae allowed to receive affordable housing credit for buying subprime securities.
*1997: Mortgage denial rate of 29 percent for conventional home purchase loanscite press release |title=(untitled) |date=2004-07-26 |publisher=
Federal Financial Institutions Examination Council|accessdate=2008-03-18 |url=http://www.ffiec.gov/hmcrpr/hm072604.htm ]
Taxpayer Relief Act of 1997expanded the capital-gains exclusion to $500,000 (per couple) from $125,000, encouraging people to invest in second homes and investment properties. [Russell Roberts, [http://online.wsj.com/article/SB122298982558700341.html, "How Government Stoked the Mania] ," Wall Street Journal, October 3, 2008] .]
**November: Fannie Mae 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 Fannie Mae guarantee as to timely interest and principal. [cite web |title=FIRST UNION CAPITAL MARKETS CORP., BEAR, STEARNS & CO. PRICE SECURITIES OFFERING BACKED BY AFFORDABLE MORTGAGES |url=http://www.wachovia.com/inside/page/textonly/0,,134_307%5E306,00.html |publisher=First Union Corporation (Wachovia)] [http://findarticles.com/p/articles/mi_hb6632/is_200011/ai_n26424963?tag=rel.res1 Fannie Mae increases CRA options] ,
American Bankers AssociationBanking Journal, November, 2000.]
housing bubbleas inflation-adjusted home price appreciation exceeds 10%/year in most West Coast metropolitan areas [cite web|url=http://www.kansascityfed.org/publicat/sympos/2007/PDF/2007.08.01.Shiller.pdf
title=Understanding Recent Trends in House Prices and Home Ownership|author=Robert J. Shiller] ; Inflation-adjusted home price appreciation exceeds 10%/year in most West Coast metropolitan areas [cite web |url=http://www.kansascityfed.org/publicat/sympos/2007/PDF/2007.08.01.Shiller.pdf |title=Understanding Recent Trends in House Prices and Home Ownership |author=Robert J. Shiller ]
**October: "Financial Services Modernization Act" killed in Senate because of no restrictions on Community Reinvestment Act-related community groups written into lawStephen Labaton, [http://partners.nytimes.com/library/financial/102399banks-congress.html Issue in Depth: Leading Up to the Decision on Banking Reform] , Washington Post, October 23, 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. Steven A Holmes, [http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1 Fannie Mae Eases Credit To Aid Mortgage Lending] ,
New York Times, September 30, 1999.]
Gramm-Leach-Bliley Act"Financial Services Modernization Act" repeals Glass-Steagall Act, deregulates banking, insurance and securities into a financial services industry allow financial institutions to grow very large; limits Community Reinvestment Coverage of smaller banks and makes community groups report certain financial relationships with banks
**October: Fannie Mae committed to purchase and securitize $2 billion of Community Investment Act-eligible loans, [ [http://www.csrwire.com/PressRelease.php?id=482 Fannie Mae Announces Pilot to Purchase $2 Billion of "MyCommunityMortgage" Loans; Pilot Lenders to Customize Affordable Products For Low- and Moderate-Income Borrowers] , [http://www.csrwire.com/about Corporate Responsibility News] , October 30, 2000.] [ [https://www.efanniemae.com/sf/mortgageproducts/mcm/ Fannie Mae "MyCommunityMortgage" homepage] .]
**November: Fannie Mae announced that the
Department of Housing and Urban Development(“HUD”) would soon require it to dedicate 50% of its business to low- and moderate-income families" and its goal was to finance over $500 billion in Community Investment Act-related business by 2010. [ [http://findarticles.com/p/articles/mi_m0EIN/is_2001_May_7/ai_74223918/pg_1?tag=artBody;col1 Fannie Mae's Targeted Community Reinvestment Act Loan Volume Passes $10 Billion Mark; Expanded Purchasing Efforts Help Lenders Meet Both Market Needs and CRA Goals] , Business Wire, May 7, 2001.]
Commodity Futures Modernization Act of 2000defines 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 oversightBarry L. Ritzholtz, [http://online.barrons.com/article/SB122246742997580395.html A Memo Found in the Street] , Barron's Magazine, September 29, 2008.] , and contributing to 2008 crisis in Bear Stearns, Lehman Brothers, and AIG. [ [http://thomas.loc.gov/cgi-bin/query/z?c106:H.R.5660.IH: H.R.5660 - Commodity Futures Modernization Act of 2000 (Introduced in House)] ] [Adam Davidson (September 18, 2008) [http://www.reuters.com/article/newsOne/idUSMAR85972720080918 "How AIG Fell Apart"] , Reuters.] [Katie Benner (September 17, 2008) [http://money.cnn.com/2008/09/16/news/derivatives_benner.fortune/?postversion=2008091621 "AIG woes could swat swap markets"] , Fortune (via CNNMoney.com).]
Dot-com bubbleand collapse
Early 2000s recession(exact time varies by country)
*2000-2001: US Federal Reserve lowers
Federal funds rate11 times, from 6.5% (May 2000) to 1.75% (December 2001), [cite web|url=http://www.federalreserve.gov/fomc/fundsrate.htm|title=Intended federal funds rate, Change and level, 1990 to present] creating an easy-credit environment that encouraged less-qualified home buyers and investments in higher yielding subprime mortgages. [Russ Wiles, [http://www.azcentral.com/business/articles/2008/09/16/20080916biz-CreditCrisisEvolution0724.html The housing crisis: How we got here}, Arizona Republic, September 16, 2008.]
*2002: Annual home price appreciation of 10% or more in California, Florida, and most Northeastern states. [cite web |title=Annual home-value growth at highest rate since 1980 |url=http://www.allbusiness.com/finance/3595974-1.html |accessdate=2008-10-06]
**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 Americawith faith based organizations. [ [http://www.whitehouse.gov/news/releases/2002/06/20020617-2.html Press Release, President Calls for Expanding Opportunities to Home Ownership, Remarks by the President, June 17, 2000.]
*2002–2003: Mortgage denial rate of 14 percent for conventional home purchase loans, half of 1997
*2003: Fannie Mae and Freddie Mac buy $81 billion in subprime securities.
Federal ReserveChair Alan Greenspanlowers federal reserve’s key interest rate to 1%, the lowest in 45 years. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**September: Bush administration recommended moving governmental supervision of Fannie Mae and Freddie Mac under a new agency created within the
Department of the Treasury. The changes were blocked by Congress. [Steven Labaton, [http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print New Agency Proposed to Oversee Freddie Mac and Fannie Mae] , The New York Times, September 11, 2003.]
*2003-2007: The Federal Reserve failed 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.
**U.S. homeownership rate peaked with an all time high of 69.2 percent.cite news |title=Census Bureau Reports on Residential Vacancies and Homeownership |date=2007-10-26 |publisher=
U.S. Census Bureau|format=PDF |url=http://www.census.gov/hhes/www/housing/hvs/qtr307/q307press.pdf ]
**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; from 2004 to 2006, they purchased $434 billion in securities backed by subprime loans
**October:SEC effectively suspends net capital rule for five firms -
Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearnsand Morgan Stanley. Freed from government imposed limits on the debt they can assume, they levered up 20, 30 and even 40 to 1 [cite web|url=http://www.nytimes.com/2008/10/03/business/03sec.html The Reckoning, Agencies 04 rule lets banks pile up new debt]
*2004-2005: Arizona, California, Florida, Hawaii, and Nevada record price increases in excess of 25% per year.Fact|date=October 2008
**February: The Office of Thrift Supervision implemented new rules that allowed savings and loans with over $1 billion in assets to meet their CRA obligations without investing in local communities, cutting availability of subprime loans.
FDIC, Federal Reserve, and the Office of the Controller of the Currency allow loosening of Community Reinvestment Act requirements for "small" banks, further cutting subprime loans. [http://www.fdic.gov/news/news/financial/2006/fil06033.html FDIC Financial Institution Letters: Community Reinvestment Act Interagency Examination Procedures] , April 10, 2006]
**Fall 2005: Booming housing market halts abruptly; from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide dropped of 3.3 percent. [Les Christie, [http://money.cnn.com/2006/05/15/real_estate/NAR_firstQ2005_home_prices/index.htm Real estate cools down, Prices in the first quarter fell 3% from the fourth quarter] ,
CNNMoney, May 16, 2006.]
**May: In possibly the first casualty of the looming subprime crisis, Kirkland, Washington based Merit Financial Inc. files for bankruptcy and closes its doors, firing all but 80 of its 410 employees; Merit’s marketplace had declined about 40% and sales were not bringing in enough revenue to support overhead. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**August: U.S. Home Construction Index is down over 40% as of mid-August 2006 compared to a year earlier. [cite news |title=U.S. Home Construction Index (DJ_3728) |work=
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 index records first year-over-year decline in nationwide house prices since 1991. [cite web|url=http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html|title=S&P/Case-Shiller house price index] The
subprime mortgageindustry collapses, and a surge of foreclosure activity (twice as bad as 2006 [http://www.huffingtonpost.com/hale-stewart/housing-problems-start-to_b_53510.html Huffington Post] quotes [http://www2.fdic.gov/qbp/2007mar/qbp.pdf the FDIC's Quarterly Banking Profile] : "The next sign of mortgage related financial problems came out in the FDIC's Quarterly Banking Profile. The report noted on page 1, 'Reflecting an erosion in asset quality, provisions for loan losses totaled $9.2 billion in the first quarter [of 2007] , an increase of $3.2 billion(54.6%) from a year earlier.' The reason for the loan-loss provision increases was an across the board increase in delinquencies and charge offs which increased 48.4% from year ago levels. The report noted on page 2 that 'Net charge-offs of 1-4 family residential mortgage loans were up by $268 million (93.2%) [from year ago levels] .'" ] ) and rising interest rates threaten to depress prices further as problems in the subprime markets spread to the near-prime and prime mortgage markets.cite news |title=Lender Sees Mortgage Woes for 'Good' Risks |work= The New York Times|date=2007-07-25 |url=http://www.nytimes.com/2007/07/25/business/25lend.html ] Year-to-year decreases in both U.S. home sales and home prices accelerates rather than bottoming out, with U.S. Treasury secretary Paulson calling the "the housing decline ... the most significant risk to our economy."cite news |title=Housing woes take bigger toll oneconomy than expected: Paulson |date=2007-10-17 |work=AFP |url=http://afp.google.com/article/ALeqM5hWSjWmGJ4YXTh3PM5kOC7csTT48g]
**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. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**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. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**February–March: Subprime industry collapse; more than 25 subprime lenders declaring
bankruptcy, announcing significant losses, or putting themselves up for sale.
**March: Ben Bernanke suggested more Fannie Mae and Freddie Mac loans be extended to help banks fulfill their Community Investment Act obligations by providing them with more opportunities to securitize CRA-related loans. [Chairman Ben S. Bernanke, [http://www.federalreserve.gov/newsevents/speech/Bernanke20070306a.htm GSE Portfolios, Systemic Risk, and Affordable Housing] , Speech before the Independent Community Bankers of America's Annual Convention and Techworld, Honolulu, Hawaii (via satellite), March 6, 2007.]
New Century Financial, largest U.S. subprime lender, files for chapter 11 bankruptcy. [http://money.cnn.com/2007/04/02/news/companies/new_century_bankruptcy/ New Century files for Chapter 11 bankruptcy] , selling its assets for $139 million, subject to bankruptcy approval. CNNMoney, April 3 2007.]
**April 3: According to CNN Money, business sources report lenders made $640 billion in subprime loans in 2006, nearly twice the level3 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.
**April 18: Freddie Mac fined $3.8 million by far the
Federal Election Commissionas a result of illegal campaign contributions, much of it to members of the United States House Committee on Financial Serviceswhich oversaw Freddie Mac. [ [ http://www.msnbc.msn.com/id/12373488/from/RSS/ Freddie Mac pays record $3.8 million fine, Settles allegations it made illegal contributions between 2000 and 2003] , Associated Press, April. 18, 2006.]
Bear Stearns, Bear Stearns 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.
Dow Jones Industrial Averagecloses above 14,000 for the first time in its history. [ [http://finance.yahoo.com/q/hp?s=^DJI&a=06&b=10&c=2007&d=06&e=30&f=2007&g=d Dow-Jones historical prices] ]
Merrill Lynchseized $800 million in assets from two Bear Stearns hedge fundsthat were involved in securities backed by subprime loans. [ [http://money.cnn.com/2007/06/20/news/companies/bear_stearns/index.htm Merrill takes over $800 million Bear hedge fund assets - Jun. 20, 2007 ] ] .
**August: worldwide "credit crunch" as subprime mortgage backed securities are discovered in portfolios of banks and hedge funds around the world, from
BNP Paribasto Bank of China. Many lenders stop offering home equity loans and "stated income" loans. Federal Reserveinjects about $100B into the money supply for banks to borrow at a low rate.
American Home Mortgage Investment Corporation(AHMI) filed Chapter 11 bankruptcy. The company expected to see up to a $60 million loss for the first quarter 2007[ [http://www.reuters.com/article/marketsNews/idUKWEN037120070810?rpc=44 Accredited Home sees up to $60 mln loss for quarter | Markets | Markets News | Reuters ] ] .
Mortgage Guaranty Insurance Corporation(MGIC, Milwaukee, Wisconsin) announced it would discontinue its purchase of Radian Group[ [http://www.forbes.com/markets/2007/08/10/mgic-investment-radian-markets-equity-cx_ra_0810markets10.html MGIC May Abandon Radian] , Forbes, 2007-08-10] after suffering a billion-dollar loss [" Milwaukee Journal-Sentinel", August 6, 2007] of its investment in Credit-Based Asset Servicing and Securitization (C-BASS, New York] ). [cite press release |url=http://www.c-bass.com/Press/Blackstone%20Announcement%20080307.pdf |title=C-Bass LLC Retains the Blackstone Group |date=2007-08-03 |publisher=C-BASS ]
**August 9: French bank
BNP Paribasstopped valuing three of its funds and suspended all withdrawals due to "a complete evaporation of liquidity". [ cite news| url=http://www.marketwatch.com/news/story/bnp-suspends-fund-valuations-amid/story.aspx?guid=%7BE6B2639B%2D407F%2D4383%2DA6EC%2D48872DA48B08%7D&siteid=yhoof| title=BNP suspends funds amid credit-market turmoil| first= Simon| last= Kennedy| publisher= MarketWatch|date=August 9, 2007]
**August 10: Central banks coordinate efforts to increase liquidity for first time since the aftermath of the
September 11, 2001 terrorist attacks. [http://www.usatoday.com/money/economy/2007-08-10-274019294_x.htm "ECB, Fed Inject Cash to Ease Fears"] by Matt Moore, "Associated Press", August 10 2007] The United States Federal Reserve (Fed) has injected 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 have come from the central banks of Australia, and Canada.
**August 14: Sentinel Management Group suspended redemptions for investors and sold off $312 million worth of assets; three days later it Sentinel filed for Chapter 11 bankruptcy protection. [cite web|url=http://www.chicagotribune.com/business/chi-sat_sentinel0818aug18,0,4532488.story|title=Sentinel makes Chapter 11 filing|publisher=Chicago Tribune|accessdate=2007-08-19] US and European stock indices continued to fall. [cite news| url=http://biz.yahoo.com/ap/070814/wall_street.html?.v=31| title=Stocks Fall on Consumer, Credit Worries| first=Joe| last=Bel Bruno| publisher=AP|date=August 14, 2007]
**August 15: The stock of
Countrywide Financial, which is the largest mortgage lender in the United States, fell around 13% on the New York Stock Exchangeafter Countrywide said foreclosures and mortgage delinquencies had risen to their highest levels since early 2002. [cite news| url=http://www.reuters.com/article/marketsNews/idUKN1525333820070815?rpc=44| title=Countrywide plunges on downgrade, bankruptcy fear| first=Jonathan| last=Stempel| publisher=Reuters|date=August 15, 2007]
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. [ [http://www.bloomberg.com/apps/news?pid=20601087&sid=ax4Hih1unXTs Countrywide Taps $11.5 Billion Credit Line From Banks] ]
**August 17: the Federal Reserve cut 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. [cite news| url=http://biz.yahoo.com/ap/070817/fed_interest_rates.html?.v=38| title=Fed Approves Cut in Loan Discount Rate| first=Martin| last=Crutsinger| publisher=AP|date=August 17, 2007]
**August 29: The Australian Hedge Fund, Basis Capital's "Basis Yield Alpha Fund" applied for bankruptcy protection. [cite news|url=http://cleverwithcash.com/articles/wreckage_from_us_mortgage_crisis.php| title="Wreckage From US Mortgage Crisis Reaches Australian Shores| publisher=Clever With Cash|date=August 30, 2007] [cite news|url=http://www.theage.com.au/news/business/basis-capital-hedge-fund-fails/2007/08/30/1188067276878.html| title= Basis Capital hedge fund fails| publisher=The Age|date=August 31, 2007]
**August 31: President Bush announces a limited bailout of U.S. homeowners unable to pay the rising costs of their debts.cite news |title=Bush Moves to Aid Homeowners |work=
The Wall Street Journal|date=2007-08-31 |url=http://online.wsj.com/article/SB118851742988914064.html?mod=googlenews_wsj ] Ameriquest, once the largest subprime lender in the U.S., goes out of business;cite news | title=Ameriquest closes, Citigroup buys mortgage assets | date=31 August 2007 | publisher=" Washington Post" | url=http://www.washingtonpost.com/wp-dyn/content/article/2007/08/31/AR2007083101702.html ]
**September 1–3: Fed Economic Symposium in Jackson Hole, WY addressed the housing recession that jeopardizes U.S. growth. Several critics argued that the Fed should use regulation and interest rates to prevent asset-price bubbles,cite news| title=Fed, Blamed for Asset-Price Inaction, Is Told `Tide Is Turning' | date=4 September 2007 | publisher=Bloomberg | url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aLsu9feQITDY&refer=news ] blamed former Fed-chairman
Alan Greenspan's low interest rate policies for stoking the U.S. housing boom and subsequent bust [http://www.euractiv.com/en/financial-services/subprime-crisis-greenspan-legacy/article-166429] , and Yale University economist Robert Shillerwarned of possible home price declines of fifty percent.“The examples we have of past cycles indicate that major declines in real homeprices—even 50 percent declines in some places—are entirely possible going forward from today or from the not too distant future.” cite news| publisher=Finfacts Ireland | title=Two top US economists present scary scenarios for US economy; House prices in some areas may fall as much as 50% - Housing contraction threatens a broader recession | date=3 September 2007| url=http://www.finfacts.com/irelandbusinessnews/publish/article_1011005.shtml ]
**September 6: the Federal Reserve added $31.25 billion in temporary reserves (loans) to the US money markets which had to be repaid in two weeks. [cite news| url=http://news.yahoo.com/s/afp/20070906/pl_afp/marketsfinanceusbank_070906150105| title= Fed injects 31.25 billion dollars into markets| publisher=AFP|date=September 6, 2007]
**September 7: US Labor Department announced 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. [cite news| url=http://biz.yahoo.com/ap/070907/economy.html?.v=15| title=Payrolls Drop for First Time in 4 Years| first=Jeannine| last=Aversa| publisher=AP|date=September 7, 2007]
**September 13: British bank
Northern Rockapplied to the Bank of Englandfor emergency funds caused by liquidity problems. [ [http://news.bbc.co.uk/1/hi/business/6994099.stm Northern Rock asks for Bank help] , "BBC News", 13 September 2007] Concerned customers produced "an estimated £2bn withdrawn in just three days". [http://www.ft.com/cms/s/0/0475e976-64f2-11dc-bf89-0000779fd2ac.html]
**September 14: A run on the bank forms at the
United Kingdom's Northern Rockbank precipitated by liquidity problems related to the subprime crisis. cite news | title=Northern Rock asks for Bank help | date=13 September 2007| publisher= BBC| url=http://news.bbc.co.uk/1/hi/business/6994099.stm ]
**September 17: Former Fed Chairman
Alan Greenspansaid "we had a bubble in housing" [http://www.pbs.org/newshour/bb/business/july-dec07/greenspan_09-18.html] 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. [cite news | title=Fed Cuts Key Interest Rates by a Half Point | date=18 September
2007| publisher="The New York Times" | url=http://www.nytimes.com/2007/09/18/business/18cnd-fed.html?_r=1&hp=&oref=slogin&pagewanted=all ]
**September 28: Television finance personality
Jim Cramerwarns Americans on "The Today Show", "don't you dare buy a home—you'll lose money," causing a furor among realtors.cite news | title=Jim Cramer vs NAR President | date=28 September 2007| publisher="The Today Show" | url=http://www.youtube.com/watch?v=N_WuwoDYPdQ ]
**September 30: Affected by the spiraling mortgage and credit crises, Internet banking pioneer
NetBankgoes bankruptcite news | title=NetBank Files for Bankruptcy After Regulators Take Over Unit | date=30 September 2007| publisher=Bloomberg | url=http://www.bloomberg.com/apps/news?pid=20601087&sid=ajOPHuXaoV3c&refer=home ] , and the Swiss bank UBS announced that it lost US$690 million in the third quarter.cite news | title=UBS forecasts pretax loss up to $690 million in 3Q | date=30 September 2007| publisher=" International Herald Tribune" | url=http://www.iht.com/articles/ap/2007/10/01/business/EU-FIN-COM-Switzerland-UBS-Loss.php ]
Merrill Lynchannounced a US$5.5 billion loss as a consequence of the subprime crisis, which was revised to $8.4 billion on October 24, a sum that credit rating firm Standard & Poor'scalled "startling". [cite news| url=http://seattletimes.nwsource.com/html/businesstechnology/2003973235_merrill25.html| title="Startling" $8 billion loss for Merrill Lynch| first=Bradley| last=Keoun| publisher=Bloomberg| date=Ocotber 25, 2007]
Hope Now Alliancewas created by the US Government and private industry to help some sub-prime borrowers. [http://www.fsround.org/media/pdfs/AllianceRelease.pdf]
**October 15–17: A consortium of U.S. banks backed by the U.S. government announced a "
super fund" of $100 billion to purchase mortgage-backed securities whose mark-to-marketvalue plummeted in the subprime collapse.cite news | title=‘Super fund’ helps ease markets | date=15 October 2007| publisher=" Financial Times" | url=http://www.ft.com/cms/s/0/26ddbb82-7b55-11dc-8c53-0000779fd2ac.html ] Both Fed chairman Ben Bernankeand Treasury Secretary Hank Paulsonexpressed alarm about the dangers posed by the bursting housing bubble; Paulson said "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."cite news | title=Housing woes take bigger toll on economythan expected: Paulson | date= 17 October 2007| publisher="AFP" | url=http://afp.google.com/article/ALeqM5hWSjWmGJ4YXTh3PM5kOC7csTT48g ]
Federal Reservelowers the federal funds rate by 25 basis points to 4.5%.
Federal Reserveinjects $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.
Financial Accounting Standards Board"Fair Value Measurements" standards upgrade the quality of financial reporting through greater transparency.cite journal |title= FASB|publisher=" Journal of Accountancy" |date=2007-Nov |url=http://www.aicpa.org/pubs/jofa/nov2007/fair_value_measurement.htm ] cite web |title=Summary of Statement No. 157 |publisher=" Financial Accounting Standards Board" |date=2006-09-28 |url=http://www.fasb.org/st/summary/stsum157.shtml ] 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. [Alan Bock, [http://www.lewrockwell.com/orig5/bock6.html Market Failure? Try Yet Another Government Failure] , LewRockwell.com, October 1, 2008.]
**December 6: President Bush announced a plan to voluntarily and temporarily freeze the mortgages of a limited number of mortgage debtors holding adjustable rate mortgages (ARM). He also ask 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. [ [http://www.whitehouse.gov/news/releases/2007/12/20071206-7.html Fact Sheet: Helping American Families Keep Their Homes ] ] .
**December 24: A consortium of banks officially abandons the U.S. government-supported "super-SIV" mortgage crisis bail-out plan announced in mid-October,cite news |date=2007-12-24 |title=Banks abandon plan for Super-SIV |work=
Reuters|url=http://uk.reuters.com/article/fundsNews/idUKNOA43186020071224 ] 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.
Financial crisis escalates with collapse of major lenders and investors.
January 2008 stock market downturn
**January 24: The
National Association of Realtors(NAR) announced that 2007 had the largest drop in existing home sales in 25 years, [cite news |date=2008-01-24 |title=Biggest Drop in Existing Home Sales in 25 Years |work= The New York Times|url=http://www.nytimes.com/aponline/business/AP-Economy.html?em&ex=1201323600&en=1b649a5aa248c399&ei=5087%0A ] and "the first price decline in many, many years and possibly going back to the Great Depression." [cite news |date=2008-01-24 |title=Home Prices Fell in '07 for First Time in Decades |work= The New York Times|url=http://www.nytimes.com/2008/01/24/business/24cnd-home.html ]
**March 1–June 18: 406 people were arrested for
mortgage fraudin an FBI sting across the U.S., including buyers, sellers and others across the wide-ranging mortgage industry.cite news | title=FBI Cracks Down On Mortgage Fraud | date=2008-06-19 | publisher = CBS news| url=http://www.cbsnews.com/stories/2008/06/19/national/main4194649.shtml]
**March 10: Dow Jones Industrial Average at the lowest level since October 2006, falling more than 20% from its peak just five months prior.
Bear Stearnsgets Fed funding as shares plummet [ [http://www.reuters.com/article/businessNews/idUSN1438968020080314?feedType=RSS&feedName=businessNews Reuters News] ] .
Bear Stearnsgets acquired for $2 a share by JPMorgan Chasein a fire sale avoiding bankruptcy. The deal is backed by Federal Reserve providing up to $30B to cover possible Bear Stearn losses. [ [http://biz.yahoo.com/ap/080316/jpmorgan_bear_stearns.html JPMorgan to Buy Bear for $2 a Share: Financial News - Yahoo! Finance ] ] .
UBS AGSwiss bank announced plans to cut 5,500 jobs by the middle of 2009 [ [http://www.business-standard.com/common/news_article.php?tab=r&autono=322196&subLeft=1&leftnm=2 "UBS to cut 5,500 jobs next year", Business Standard] ]
**June 18: As the chairman of the
Senate Banking CommitteeConnecticut's Christopher Doddproposed 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 from Countrywide, who regarded Dodd as a "special" customer and a "Friend of Angelo." Dodd received a $75,000 reduction in mortgage payments from Countrywide.cite news |date=2008-06-12 |title=Countrywide's Many 'Friends' |work= Conde Nast Portfolio|url=http://www.portfolio.com/news-markets/top-5/2008/06/12/Countrywide-Loan-Scandal ] cite news |date=2008-06-19 |title=Angelo's Angel |work= Wall Street Journal|url=http://online.wsj.com/article/SB121383295591086669.html?mod=googlenews_wsj ] The Chairman of the Senate Finance Committee Kent Conradand the head of head of Fannie MaeJim Johnson also received mortgages on favorable terms due to their association with Countrywide CEO Angelo R. Mozilo.cite news |title=Countrywide Friends Got Good Loans |date= 7 June 2008|work= Wall Street Journal| url=http://online.wsj.com/article/SB121279970984353933.html?loc=interstitialskip ]
**June 19: Ex-
Bear Stearnsfund managers were 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. [cite news |date=2008-06-19 |title=Ex-Bear Stearns Fund Managers Arrested by FBI Agents |work= Bloomberg|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aHZnRy9Si0OI&refer=home ]
**July 11 Indymac Bank, a subsidiary of Independent National Mortgage Corporation (Indymac), is placed into the receivership of the
FDICby the Office of Thrift Supervision. It was the fourth largest bank failure in United Stateshistory,  and the second largest failure of a regulated thrift.cite news |url= http://www.newsday.com/business/nationworld/wire/sns-ap-indymac,0,5354918.story
title=Government shuts down mortgage lender IndyMac |first=Alex |last=Veiga |publisher=Associated Press (Newsday) |date=2008-07-12 |accessdate=2008-07-12] [cite web |url= http://www.thestreet.com/story/10431578/1/indymac-bancorp-to-liquidate.html |title= IndyMac Bancorp to Liquidate |accessdate= 2008-08-01 |last= LaCapra |first= Lauren Tara |date= 2008-08-01 |work=
TheStreet.com] . Before its failure, IndyMac Bank was the largest savings and loan associationin the Los Angelesarea and the seventh largest mortgageoriginator in the United States. [cite news|url=http://www.reuters.com/article/pressRelease/idUS108706+08-Apr-2008+BW20080408|title=IndyMac Bancorp Announces Earnings Webcast & Teleconference Call for First Quarter 2008 Financial Results|date=2008-08-08|publisher= Reuters|accessdate=2008-07-13]
Federal takeover of Fannie Mae and Freddie Macwhich at that point owned or guaranteed about half of the U.S.'s $12 trillion mortgage market. [Duhigg, Charles, [http://www.nytimes.com/2008/07/11/business/11ripple.html?ex=1373515200&en=8ad220403fcfdf6e&ei=5124&partner=permalink&exprod=permalink "Loan-Agency Woes Swell From a Trickle to a Torrent"] , The New York Times, Friday, July 11, 2008]
Merrill Lynchsold to Bank of Americaamidst fears of a liquidity crisis and Lehman Brotherscollapsecite news |url=http://online.wsj.com/article/SB122142278543033525.html?mod=special_coverage |title=Bank of America Reaches Deal for Merrill |author=Matthew Karnitschnig|coauthors=Carrick Mollenkamp, Dan Fitzpatrick |publisher=The Wall Street Journal |date=2008-09-14]
Lehman Brothersfiles for bankruptcy protection [ [http://www.iht.com/articles/ap/2008/09/15/business/NA-US-Lehman-Brothers-Profile.php "Grown over 150 years, Lehman end came swiftly", International Herald Tribune] ]
Moody'sand 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.cite web |url=http://www.marketwatch.com/news/story/sp-ratings-american-international-group/story.aspx?guid=%7B8C56118F-B5ED-4211-9AEF-1242D2F292F5%7D&dist=hppr |title=S&P: Ratings on American International Group Lowered and Kept on CreditWatch Negative |date=2008-09-16 |accessdate=2008-09-16 |publisher=MarketWatch] cite news |url=http://www.nytimes.com/2008/09/17/business/worldbusiness/17markets.html?_r=1&hp&oref=slogin |title=Wall Street Holds Steady; Fed to Meet |author=Michael Grynbaum |date=2008-09-16 |accessdate=2008-09-16 |publisher=The New York Times]
**September 17: The US Federal Reserve loans $85 billion to American International Group (AIG) to avoid bankruptcy.
**September 19: Paulson financial rescue plan unveiled after a volatile week in stock and debt markets.
Washington Mutualwas seized by the Federal Deposit Insurance Corporation, and its banking assets were sold to JP MorganChasefor $1.9bn.
**September 29: Emergency Economic Stabilization Act defeated 228-205 in the
United States House of Representatives; Federal Deposit Insurance Corporationannounces that Citigroup Inc. would acquire banking operations of Wachovia. [ [http://www.fdic.gov/news/news/press/2008/pr08088.html FDIC press release announcing takeover of Wachovia by Citigroup] ]
**October 1: The U.S. Senate passes
HR1424, their version of the bailout bill.
**October 3, 2008: The U.S. House of Representatives passes
HR1424and President George W. Bushsigns it into law. It contains also easing of the accounting rules that forced companies to collapse because of the existence of toxic mortgage-related investments. "Also key to winning GOP support was a decision by the Securities and Exchange Commission to ease accounting rules that require financial institutions to show the deflated value of assets on their balance sheets."cite news |title=Historic bailout bill passes Congress; Bush signs |publisher=" Associated Press" |date=2008-10-03 |url=http://biz.yahoo.com/ap/081003/financial_meltdown.html ]
**October 6-10: Worst week for the stock market in 75 years. The Dow Jones lost 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 lost 18.2 percent, its worst week since 1933, down 42.5 percent in since its own high October 9, 2007. [Tim Paradis, [http://ap.google.com/article/ALeqM5gHs5OM3gFG_DytQQZFbWfgPT08MAD93NULL80 Stocks end worst week mixed after wild session] ,
Associated Press, October 10, 208.]
**October 6: Bank of America agrees to settle claim of predatory lending charges against recently acquired Countrywide Financial. The settlement was with attorney generals in 11 states. Bank of America agreed to offer more affordable mortgage payments to borrowers who financed with subprime mortgage loans or pay option adjustable rate mortgages serviced by Countrywide and originated before December 31, 2007. Bank of America said that around 400,000 borrowers will be helped by the deal. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**October 6: The Danish government announces plan to guarantee all banking deposits and some inter-bank loans. In return for the guarantees, the country’s banks must establish a rescue fund of $6.5 billion. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**October 6: BNP Paribas agrees to takeover Fortis from the Belgian government for €14.5 billion. This deal makes BNP the largest bank operating in the Eurozone. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**October 6: Iceland, as a measure to ease the
2008 Icelandic financial crisis, passes legislation that allows the government to nationalize, merge, or force ailing banks into bankruptcy. The new bill also allows the government to take over housing loans held by the banks and put them into a government housing fund. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**October 7: Bank of America reports third quarter earnings of $1.2 billion, less than analyst expectations. In an effort to get through the credit crisis, BofA cut its dividend by half and announced plans to raise an additional $10bn in capital. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
**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. [http://www.uiowa.edu/ifdebook/timeline/timeline1.shtml J. Cox (2008), "Credit Crisis Timeline" University of Iowa Center for International Finance and Development E-Book] ]
Timeline of the United States housing bubblefor the pre-subprime crisis timeline
Financial crisis of 2007–2008for the liquidity crisis as a whole
Global financial crisis of September–October 2008for the resulting global sharp reductions in the value of equities (stock), financial instruments, and commodities worldwide.
* [http://www.creditwritedowns.com/2008/05/credit-crisis-timeline.html Credit crisis timeline]
* [http://www.uiowa.edu/ifdebook/timeline/Credit_Crisis_Timeline.pdf Detailed Credit Crisis Timeline]
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