The
Great Recession:
Mortgage
and Credit Crisis Timeline
The crisis in world
financial markets that later became known as The Great Recession,
began when prices started declining in the U.S. real estate market
in late 2006. The crisis precipitated major sell-offs in stock
exchanges around the world.
A timeline of major
events in the world-wide mortgage and credit crisis:
March/April 2007:
New
Century Financial corporation stops making new loans as
awarding high risk mortgage loans to consumers with problematic
credit histories becomes more financially risky. The
International Monetary Fund (IMF) warns of risks to global
financial markets from weakened US home mortgage market.
June 2007:
Concerns
grow on Wall Street as two hedge funds of the New York
investment bank Bear Stearns move toward collapse due to Bear
Sterns' extensive investments in mortgage-backed
securities.
July and August 2007:
German
banks with bad investments in the American real estate market
become invol in the crisis, including IKB Deutsche
Industriebank, Sachsen LB (Saxony State Bank) and BayernLB
(Bavaria State Bank).
President George W. Bush rejects government intervention to
ease the crisis in the home mortgage market, saying that he
wants to let the market. President Bush later promises help for
struggling homeowners as a means to help ease the mortgage
crisis.
Foreclosures
of American homes in July increased 93 percent from the
previous year, affecting 180,000 home-owners.
September 2007:
British
bank Northern Rock is in trouble, and depositors became ver
concerned; The British government and Bank of England guarantee
the deposits; the bank is nationalized by the British
government. The U.S. Federal Reserve (also known as "The Fed")
begins a series of interest rate decreases, in an attempt to
ease the impact of the real estate slump and mortgage
crisis.
October 2007:
Profits
at financial giant Citigroup drop sharply. The International
Monetary Fund (IMF) lowers its 2008 growth forecast for the
Euro to 2.1 percent from 2.5 percent, in part because of the
spillover from the U.S. subprime mortgage crisis and credit
market crunch.
December 2007:
President
Bush proposes a plan to help up to 1.2 million homeowners pay
their home loans.
January 2008:
Swiss
banking giant UBS reports a $18 billion write-down due to its
exposure to the American real estate market. In the U.S., Bank
of America acquires Countrywide Financial, the nation's biggest
mortgage lender. The Fed slashes interest rates by three
quarters of a percentage point to 3.5 percent following a majpr
sell-off on the global markets. Another Fed cut the end of
January lowers the rate to only 3 percent.
February 2008:
Fannie
Mae, the largest financial institution for U.S. home loans,
reports a $3.55 billion loss for fourth quarter 2007, three
times what had been expected.
March 2008:
On
the verge of collapse and under pressure by the Fed, Bear
Stearns has to accept a buyout by major American investment
bank JP Morgan Chase. The purchase is backed by a $30 billion
loan from the Federal Reserve.
In Germany, Deutsche Bank reports a loss of 141 million euros
for the first quarter of 2008, its first quarterly loss in five
years. Fed spearheads coordinated push by world central banks
to bolster global economic confidence by announcing moves to
pump $200-billion liquidity into markets.
Carlyle
Capital defaults on $16.6 billion debt. The U.S. government
frees up $200 billion to support the troubled Fannie Mae and
Freddie Mac mortgage giants.
April 2008:
The
International Monetary Fund projects a $945 billion loss from
financial crisis. G7 finance ministers agree to institute a new
wave of financial regulations to better deal with the growing
financial crisis.
June 2008:
Home
repossessions in the United States more than doubles as the
housing and mortgage crisis continues. Bear Stearns executives
are among over 400 individuals charged in court with mortgage
fraud.
July 2008:
California
mortgage lender IndyMac collapses. The condition of Fannie Mae
and Freddie Mac continues to worsen. The U.S. Treasury and the
Federal Reserve move to guarantee the debts of Fannie Mae and
Freddie Mac. President Bush defends the move, telling Americans
to take a "deep breath" and to have "confidence in the mortgage
markets."
The
United States Congress gives final passage to
multi-billion-dollar program to address mortgage and
foreclosure crisis. Spain's largest property developer,
Martinsa-Fadesa, declares insolvency.
September 7:
The
United States government seizes control of Fannie Mae and
Freddie Mac.
September 15:
Lehman
Brothers investment bank declares a $600-billion bankruptcy.
Merrill Lynch is acquired by Bank of America.
September 17:
The
U.S. Government bails out AIG insurance giant for $85
billion.
September 19:
The
White House requests $700-billion
bailout plan
from Congress for all financial firms with bad mortgage
securities to free up tightening credit flow.
September
22:
The
last two standing investment banks, Morgan Stanley and Goldman
Sachs, convert to bank holding companies.
September 26:
The
Federal government seizes Washington Mutual (WAMU) in America's
largest-ever U.S. bank failure.
September 29:
The
U.S. House of Representatives rejects mammoth $700-billion
bailout plan.
Governmental
bail-outs announced for key banks in Britain, the Benelux
countries and Germany, as well as a state takeover of a major
bank in Iceland. The British government intervenes to save
major mortgage lender Bradford & Bingley. Netherlands,
Belgium and Luxembourg begin the process to take over
substantial parts of Belgian-Dutch banking and insurance
company Fortis.
The
German Finance Ministry announces that the government and major
banks were moving to inject billions of Euros into troubled
mortgage lender Hypo Real Estate. Iceland government and
Glitnir bank announce state takeover of 75-percent stake in
Glitnir.
September
30:
Wachovia
Bank nears collapse, and starts negotiations with Citigroup for
a takeoverby Citigroup.
October 1:
The
U.S. Senate adopts a massive
bail-out plan.
October 3:
Wells
Fargo bank and the fourth-largest U.S. bank, Wachovia, announce
their merger.
October
3:
The
largest government intervention in capital markets in U.S.
history clears the US House of Representatives, becoming law
with President Bush's signature.
Links
and Sources:
Wall
Street's 8 brutal days: Dow plunges 2,400 points, or 22%, as
panicked investors run for the
exits.--CNN,
Oct. 12, 2008
The
crisis-A timeline:A shocking series of events that forever changed
the financial markets.