Financial Crisis Timeline*

Page 1: 2003-2007

The university of Iowa center for international finance & Development

Prepared by Jason Cox and Laurie Glapa

Last updated: July 1, 2009

 

June 2003:

• Greenspan lowers Fed’s key rate to 1%, the lowest in 45 years

  http://www.bloomberg.com/apps/news?pid=20601087&sid=aclMlgBb3taQ&refer=home

2006:

• Lenders make $640 billion in subprime loans:

• 20% of all mortgage lending was subprime

  http://money.cnn.com/2007/04/02/news/companies/new_century_bankruptcy/

May 5, 2006:

• 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, kept to wind down the business.

• Chief financial officer, Ryan Kidd, said that Merit’s marketplace had declined about 40% and sales were not bringing in enough revenue to support the overhead of running the company.

  http://seattlepi.nwsource.com/business/269154_merit05.html

August 26, 2006:

• Defaults on subprime mortgages start to occur much earlier in the mortgage process.

• Investors and analysts believe this trend could be the result of lax underwriting quality or a sign of a weakening mortgage credit market.

  http://www.facorelogic.com/uploadedFiles/Newsroom/RES_in_the_News/Subprime_Mortgage_Lenders_Seeing_Early_Payment_Defaults.pdf

January 3, 2007:

• Ownit Mortgage Solutions Inc. files for Chapter 11.

• Owed Merrill Lynch around $93 million when filing.

  http://www.californiabankruptcylawyerblog.com/2007/01/californiabased_ownit_mortgage.html

February 5, 2007:

• Mortgage Lenders Network USA Inc. files for Chapter 11.

• 15^th largest subprime lender with $3.3 billion in loans funded in third quarter 2006.

  http://www.boston.com/news/local/connecticut/articles/2007/02/05/mortgage_lenders_network_files_for_ch_11_bankruptcy_protection/

February 7, 2007:

• HSBC, a large London based bank, issues a warning that an earlier statement about its Mortgage Services operations will be much worse than current market estimates.

• HSBS blames this drop on the increased delinquencies of US subprime mortgages and the inability to refinance because of falling equity prices. :

• The release said that the aggregate loan impairment charges and credit risk provisions could be 20% higher than the earlier statement.

  http://www.hsbc.com/1/2/newsroom/news/news-archive-2007/hsbc-trading-update-us-mortgage-services

February 10, 2007:

• The Group of Seven Finance Ministers meet in Essen, Germany to discuss worldwide financial problems. :

• One of the main concerns is the lack of regulation of hedge funds. Germany says this could be a source of systematic risk for the financial system where the US believed market discipline is the best way to address the issue.

• Henry Paulson noted that the US residential housing market had been cooling over the last year but appears to have stabilized.

  http://www.ft.com/cms/s/0/3db4a4e4-b650-11db-9eea-0000779e2340.html

  http://www.ustreas.gov/press/releases/hp255.htm

February 13, 2007:

• ResMae Mortgage Corp. files for Chapter 11.

• Credit Suisse Group buys $19.1 million in assets in auction.

• ResMae made $7.7 billion in subprime loans in 2006 making it 26^th in subprime lending.

  http://www.bloomberg.com/apps/news?pid=20601087&sid=arsKNQcbPcxc&refer=home

March 2007:

• New Century Financial announces it will stop making loans and needs emergency financing to survive.

• Stock price goes from $15 at the beginning of March to $3.21 when announcement is made.

  http://www.nytimes.com/2007/03/11/business/11mortgage.html?pagewanted=3&_r=1

March 20, 2007:

• People’s Choice Home Loan files for Chapter 11.

  http://www.bloomberg.com/apps/news?pid=20601087&sid=atkiRNcdlZ8M&refer=home

April 3, 2007:

• New Century Financial files for Chapter 11.

• Cuts 54% of its workforce or 3,200 jobs:

• Largest subprime lender in US.

• Delisted from the NYSE:

• Defaults on $8.4 billion in loan repayments:

• New Century made $51.6 billion in subprime loans in 2006 making it 2^nd in subprime lending

  http://money.cnn.com/2007/04/02/news/companies/new_century_bankruptcy/

April 12, 2007:

• SouthStar Funding LLC files for Chapter 7.

• Another subprime lender

  http://www.reuters.com/article/gc06/idUSN1236927220070412

June 7, 2007:

• In a letter to investors, Bear Stearns suspends redemption rights for a hedge fund heavily invested in the subprime debt market because of liquidity problems.

• The fund had lost 23% of its value since January 2007 including almost 19% in April alone.

  http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_748264.htm

June 22, 2007:

• Bear Stearns agrees to a plan to loan $3.2 billion to one of its hedge funds.

• The lack of liquidity at the hedge fund is blamed on the bad bets that were placed on the US subprime mortgage market.

  http://www.ft.com/cms/s/0/d7936764-f1d5-11dc-9b45-0000779fd2ac.html

June 27, 2007:

• SEC Chairman, Christopher Cox, testifies to Congress that the SEC has opened 12 enforcement investigations into collateralized debt obligation (CDO) practices.

• This was in response to questions from Congress about the transparency of CDOs

  http://www.reuters.com/article/bondsNews/idUSWAT00779720070626

  http://www1.cchwallstreet.com/ws-portal/content/news/container.jsp?fn=07-02-07

July 6, 2007:

• UBS fires CEO and the heir apparent for chairman of the board, Peter Wuffi.

  http://www.ft.com/cms/s/0/e29e2376-2b59-11dc-85f9-000b5df10621.html

July 9, 2007:

• Credit Suisse releases a report that shows CDO losses could total up to $52 billion.

• The report stated that CDO investors will likely be in trouble but they do not predict any systematic risk.

• Ivan Vatchkov, a Credit Suisse analyst, said that “[b]anks’ direct exposure to CDOs is not as high as people think.”

  http://www.bloomberg.com/apps/news?pid=20601087&sid=aPKIHSk5cS50&refer=home

July 10, 2007:

• The Federal Reserve reports that consumer credit debt rose at an annual rate of 6.4%, the biggest jump in six months.

• This was close to double what analysts were expecting.

  http://query.nytimes.com/gst/fullpage.html?res=9E02E3D7103EF933A25754C0A9619C8B63

July 16, 2007:

• Alliance Bankcorp files for Chapter 7.

• Ceased operations on July 13, 2007.

• Lent to category of borrowers between subprime and prime.

  http://www.reuters.com/article/bondsNews/idUSN1625754520070716

July 17, 2007:

• In a letter sent to investors, two Bear Stearns hedge funds specializing in subprime debt announce that each fund has lost at least 90% of its value.

• Bear Stearns declined to provide more liquidity following the $3.2 billion given as a bailout in June 2007 to cover margin calls.

• The total of investor contributions to the funds was around $1.6 billion.

• AAA tranches of subprime debt were the only rating investing in by the funds.

  http://www.investopedia.com/articles/07/bear-stearns-collapse.asp?viewall=1

July 18, 2007:

• Ben Bernanke, chairman of the Federal Reserve, says the Fed has reduced its growth forecast for 2007 based on continuing problems in the housing market.

• The Fed still predicts moderate growth for the rest of 2007 with the economy expanding at a 2.5% to 2.75% rate, 0.5% lower than earlier estimates.

• Mr. Bernanke also acknowledged that the Fed and other regulators had been too timid in reigning in aggressive mortgage lenders.

• The Fed also announced plans to review the practices of mortgage lenders to see if new rules or enforcement are necessary.

• Bernanke estimates that the fallout of the US subprime crisis could cost up to $100 billion.

  http://www.nytimes.com/2007/07/19/business/19fed.html

July 24, 2007:

• Countrywide Financial announces that second quarter profits were down 33%.

• They also mentioned that the problems with subprime mortgages were starting to spread to conventional home loans.

• Subprime delinquencies along with a doubling of delinquencies on prime mortgages were blamed for the drop.

  http://www.ft.com/cms/s/0/e2ab1b62-3a13-11dc-9d73-0000779fd2ac.html

July 31, 2007:

• The two Bear Sterns hedge funds that had released losses on July 17 filed for Chapter 15 bankruptcy.

• Bear Stearns wound down the funds and liquidated all of the holdings in the funds.

• One commentator called it the worse thing that had ever happened to Bear Stearns.

  http://www.investopedia.com/articles/07/bear-stearns-collapse.asp?viewall=1

August 1, 2007:

• The first civil lawsuits are filed against Bear Sterns for the collapse of 2 hedge funds invested in subprime debt.

• The two complaints charged Bear Stearns with misleading statements about the fund’s exposure to subprime debt.

  http://www.usatoday.com/money/economy/2007-08-01-4138637345_x.htm

August 3, 2007:

• A German government-led bailout of IKB Deutsche Industriebank results in state-owned KfW assuming up to €1 billion in expected possible losses.

• KfW and other banks agreed to guarantee a liquidity line of up to €8.1 billion to cover the loss in value of the bank’s subprime US investments.

  http://www.ft.com/cms/s/0/3dd8cbf4-41e6-11dc-8328-0000779fd2ac.html

August 6, 2007:

• Bear Stearns fires their co-president, Warren Spector, allegedly for being outspoken about the error in exposing the hedge funds to subprime debt.

• Spector had worked at Bear Sterns for 24 years and was deemed by many to be the heir apparent to the CEO job.

• The presidential duties that Spector did were assigned to his co-president, Alan Schwartz.

  http://www.nytimes.com/2007/08/06/business/06bear.html?_r=1&oref=slogin

August 7, 2007:

• American Home Mortgage files for Chapter 11.

• Laid off over 6,000 workers.

• 10^th largest US retail mortgage lender in 2006.

• Catered to people considered good credit risks, not subprime.

  http://www.usatoday.com/money/economy/housing/2007-08-06-american-home-mortgage-bankruptcy_N.htm

August 9, 2007:

• France’s biggest bank, BNP Paribas SA, froze assets on three investment funds that had capital of 1.6 billion Euros.

• The funds had declined almost 20% in two weeks and the bank froze withdrawals because they couldn’t fairly value their assets because of the turmoil and their exposure to the US subprime market.

  http://www.bloomberg.com/apps/news?pid=20601087&sid=aUIoRzrktg4M&refer=home

• The European Central Bank injects €95 billion into the Eurozone banking system.

• This is the largest such intervention in over-night rates by the ECB since September 11, 2001.

  http://www.ft.com/cms/s/1/e0af0b50-46bd-11dc-a3be-0000779fd2ac.html

August 10, 2007:

• HomeBanc files for Chapter 11.

• Sold 5 retail branches to Countrywide Financial 2 days before filing bankruptcy.

  http://www.usatoday.com/money/economy/housing/2007-08-10-homebanc_N.htm

  http://www.reuters.com/article/bankingfinancial-SP/idUSN1028519720070813?pageNumber=2&virtualBrandChannel=0

• Central banks in Europe, Asia, and the Americas inject $300 billion over 2 days to prevent a credit market seizure.

• The Fed contributed $38 billion into the banking system and stated that it would provide funds as necessary to keep the financial system functioning smoothly.

• The European Central bank injected over €150 billion into their markets attempting to steady the Eurozone credit markets.

  http://www.reuters.com/article/ousiv/idUSL1019586620070810?sp=true

August 16, 2007:

• Countrywide Financial Group borrows $11.5 billion from banks to stave off bankruptcy.

• Lost more than half its stock value in 2007.

• Announced 90% of new loans would meet Fannie Mae and Freddie Mac standards.

• Fitch drops Countrywide to BBB+ and Moody’s drops to Baa3.

  http://www.bloomberg.com/apps/news?pid=20601087&sid=ax4Hih1unXTs

August 17, 2007:

• Bear Stearns cuts 240 jobs in the mortgage origination department.

• This is followed by another cut of 310 positions in early October.

  http://www.ft.com/cms/s/0/d7936764-f1d5-11dc-9b45-0000779fd2ac.html

August 24, 2007:

• Bank of America buys $2 billion in preferred shares of Countrywide Financial in an attempt to restore investor confidence.

• This resulted in a 16% ownership share and also an opportunity for BofA to match any buy-out offers (written into the contract).

  http://www.ft.com/cms/s/0/d47be632-51d5-11dc-8779-0000779fd2ac.html

August 26, 2007:

• Landesbank Baden-Württemberg (LBBW), the German public sector bank, agrees to buy Sachsen Landesbank for €250 million.

• Sachsen LB is the second German bank that needed to be bailed out because it was not big enough for large exposures to volatile credit markets.

  http://www.ft.com/cms/s/0/5732607e-53d4-11dc-9a6e-0000779fd2ac.html

August 28, 2007:

• The National Association of Realtors (NAR) reports that the supply of unsold homes in the US was at its highest in sixteen years in July.

• The NAR blamed the slowdown on mortgage liquidity issues and analysts predicted that the worse is yet to come since most of the July deals were already entered into before the severe credit tightening occurred in July and August.

  http://www.ft.com/cms/s/0/454ec98a-54fe-11dc-890c-0000779fd2ac.html

September 14, 2007:

• The Bank of England extends emergency funding to Northern Rock, a large British mortgage lender.

• The move came after investors withdrew support of Northern Rock amid worries that the institution could face short term difficulties in raising the needed capital in the wholesale market.

• The Bank of England extending the needed liquidity likely means that Northern Rock will lose its independence and there are already rumors about a larger bank purchasing it.

  http://www.ft.com/cms/s/0/c6de12c8-6258-11dc-bdf6-0000779fd2ac.html

September 21, 2007:

• Bear Stearns announces a 61% drop in earnings from the same quarter in 2006.

• On the same day, Goldman Sachs reported a 79% rise in third quarter profits beating analyst expectations.

  http://www.ft.com/cms/s/0/83965b0a-67db-11dc-8906-0000779fd2ac.html

September 26, 2007:

• The Bank of England announces an auction of £10 billion of emergency three-month funds at 6.75% and agrees to accept mortgages from banks as collateral.

• This was an attempt to provide the much needed liquidity to the banking system in England but they received no bids.

  http://www.ft.com/cms/s/0/0a7c1f86-6c5c-11dc-a0cf-0000779fd2ac.html

October 1, 2007:

• UBS announces a $3.7 billion write down.

• After the announcement, the chief executive of its investment banking division, Huw Jenkins was replaced.

  http://www.ft.com/cms/s/0/d3b47dce-71f4-11dc-8960-0000779fd2ac.html

October 3, 2007:

• Morgan Stanley cuts 600 jobs.

• This amounted to 1% of its workforce.

  http://www.foxnews.com/story/0,2933,299140,00.html

October 11, 2007:

• Treasury Secretary, Henry Paulson, spearheads a drive to mitigate the subprime mortgage crisis by bringing together investors, bond issuers, mortgage service companies, and consumer counseling services to “step up efforts to prevent foreclosures for as many families as possible.”:

• Record levels of foreclosures are expected to worsen as the adjustable-rate mortgages (ARMs) reset to higher interest rates.

• There are currently $350 billion in ARMs in the US marketplace.

• Mr. Paulson stressed that we have not solved the problem but rather taken an important step “towards a necessary goal.”

  http://www.ft.com/cms/s/0/937aee76-7796-11dc-9de8-0000779fd2ac.html

• RealtyTrac, which keeps housing data, releases a report that says foreclosures in the US housing market have doubled in September compared to the same time last year.

• The number of foreclosures is actually down 8% from August.

• Las Vegas was the hardest hit US city with one in every 185 households being foreclosed.

  http://www.ft.com/cms/s/0/88747b04-781e-11dc-8e4c-0000779fd2ac.html

October 16, 2007:

• Citigroup’s profits drop 57% from the same quarter last year.

• Write downs linked to subprime mortgages, which totaled over $3 billion, are blamed for the drop.

• This drop was slightly better news then analysts expected.

  http://www.ft.com/cms/s/0/7a71478c-7b82-11dc-8c53-0000779fd2ac.html

October 17, 2007:

• Morgan Stanley cuts another 300 bankers in its credit trading, structured products, and leveraged lending areas.

• This resulted from a worldwide freeze in activities in the global credit markets.

  http://www.marketwatch.com/news/story/morgan-stanley-lays-off-about/story.aspx?guid=%7BB2A24D74-FDB5-4DE8-85BF-840D7D89C917%7D

October 23, 2007:

• Countrywide Financial announces plans to spend $16 billion in refinancing subprime loans for at risk borrowers.

• Countrywide said this plan could help around 82,000 borrowers with ARMs.

  http://www.ft.com/cms/s/0/8580f4b4-8173-11dc-a351-0000779fd2ac.html

October 25, 2007:

• Merrill Lynch announces a $2.24 billion loss in the third quarter.

• This was mainly from the $7.9 billion in write downs on CDOs and subprime mortgages.

  http://www.ft.com/cms/s/0/8ecb1118-81f9-11dc-8a8f-0000779fd2ac.html

October 26, 2007:

• Countrywide Financial reports first loss in 25 years, third quarter loss of $1.2 billion on about $1 billion in write downs.

  http://www.ft.com/cms/s/0/142ca5a2-833e-11dc-b042-0000779fd2ac.html

October 31, 2007:

• Merrill Lynch (ML) CEO, Stan O’Neal, resigns after an announcement that ML would write down around $7.9 billion debt caused by their exposure to the subprime mortgage market.

• The $7.9 billion is $3.4 billion more than ML had predicted just three weeks earlier and is the largest write down in the credit crisis so far.

• O’Neal is offered $160 million payout from ML to leave.

  http://articles.latimes.com/2007/oct/31/business/fi-merrill31

November 5, 2007:

• Citigroup CEO, Chuck Prince, resigns after an announcement that Citigroup may have to write down up to $11 billion in bad debt from losses in the subprime mortgage crisis. :

• Former US Treasury Secretary, Robert Rubin, is named as chairman of the bank and Citi Europe Chairman, Win Bischoff, is named interim CEO.

  http://articles.moneycentral.msn.com/Investing/Dispatch/CitiFacesHugeWriteDown.aspx

November 12, 2007:

• Three major US banks, Citigroup, Bank of America, and JP Morgan Chase, agree to a plan that will buy $75 billion of weak debt.

• This scheme will hopefully inject liquidity into the market and dissuade investors from dumping more investments, worsening the credit market.

• The $75 billion fund will act as a purchaser of last resort for failing assets.

  http://news.bbc.co.uk/2/hi/business/7090339.stm

November 13, 2007:

• Bank of America says it will have to write off $3 billion of bad debt.

• The bank also said it will spend $600 million supporting some of its funds because of possible liquidity problems.

  http://news.bbc.co.uk/2/hi/business/7093464.stm

November 15, 2007:

• Barclays confirms a $1.6 billion write down in the month of October on their subprime holdings.

• The bank also released that more than £5 billion in exposure to subprime loan packages could lead to more write downs in the future.

  http://news.bbc.co.uk/2/hi/business/7095809.stm

November 16, 2007:

• The House of Representatives passes a predatory lending bill imposing liability on companies that securitize mortgages.

• The bill had four main components: 1) a licensing system for residential mortgage originators, 2) a minimum standards that borrowers have the ability to repay the loan, 3) an anti-steering component that would prohibit originators from steering consumers to a predatory loan, and 4) create another licensing system for mortgage brokers.

• The Mortgage Bankers Association opposed the bill because they thought it would limit credit availability and options for the consumer.

  http://www.ft.com/cms/s/0/074f2b04-93f4-11dc-acd0-0000779fd2ac.html

• Jan Hatzius, chief economist for Goldman Sachs, believes the total losses from the US subprime crisis could hit $400 billion.

• Mr. Hatzius said that if this figure is reached, the macroeconomic consequences could be very dramatic.

  http://news.bbc.co.uk/2/hi/business/7098368.stm

November 21, 2007:

• Freddie Mac announces a $2 billion loss in mortgage defaults and credit losses. :

• Shares in Freddie Mac dropped 28.7% and Fannie Mae dropped 24.8% upon the announcement.

• Freddie Mac complained that capital restraints could force it to raise more capital to satisfy liquidity problems.

• To cover bad loans between July and September, Freddie Mac said it had set aside $1.2 billion.

  http://www.ft.com/cms/s/0/6b48d03c-97d3-11dc-9e08-0000779fd2ac.html

November 23, 2007:

• Two French banks pledge $1.5 billion to bailout French bond insurer CIFG.

• Credit rating agencies had warned that CIFG may lose its AAA rating if it did not increase its capital cushion.

  http://www.ft.com/cms/s/0/2160f3ce-9967-11dc-bb45-0000779fd2ac.html

November 27, 2007:

• Citigroup raises $7.5 billion from Abu Dhabi government.

• These convertible securities that carried an 11% coupon were purchased by the Abu Dhabi Investment Authority.

  http://www.ft.com/cms/s/0/df7865c2-9d54-11dc-af03-0000779fd2ac.html

• Freddie Mac announces a $6 billion share issue to cover more losses from mortgages.

• In addition, Freddie Mac said it would cut its dividend by 50% in the fourth quarter to attempt to shore up its capital.

  http://news.bbc.co.uk/2/hi/business/7116254.stm

• KfW, a German state-owned bank, doubled its balance sheet risk provisions from their bailout of IKB to €4.8 billion in expected losses.

• KfW said that IKB’s subprime portfolio had significantly deteriorated since the bailout in August.

  http://www.ft.com/cms/s/0/6bbdef7e-9d01-11dc-af03-0000779fd2ac.html

November 29, 2007:

• Bear Stearns cuts 650 more jobs.

• This brings total job cuts at Bear Stearns to around 1500, more than 10% of its workforce.

  http://www.ft.com/cms/s/0/73741f0a-9e1d-11dc-9f68-0000779fd2ac.html

• The Nationwide building society announces that UK housing prices fell by 0.8% in November, the largest drop in 12 years.

• The Bank of England releases data that mortgage approvals fell to their lowest level since 2005 in October.

• This data is starting to reveal the slowdown in the UK housing market.

  http://www.ft.com/cms/s/0/6897bf0e-9ee7-11dc-b4e4-0000779fd2ac.html

• The US (White House) lowers its growth forecast for 2008 from 3.1% to 2.7%.

• The causes blamed were the ongoing problems in the housing and credit markets combined with high oil prices.

  http://news.bbc.co.uk/2/hi/business/7119104.stm

December 3, 2007:

• Moody’s, a credit rating agency, says it has already cut or might cut ratings on debt up to $116 billion.

• Much of the debt was structure investment vehicles which invested heavily in the subprime market.

  http://news.bbc.co.uk/2/hi/business/7125235.stm

December 4, 2007:

• The Financial Services Authority (FSA), the UK watchdog, warned mortgage lenders to prepare for the credit crunch to get much worse.

• The FSA said that lenders needed contingency plans to guard against what could be the worst case scenario.

• According to the FSA, around $1.4 million borrowers are due to have their short term, fixed rate mortgages expire next year. These loans were taken out when interest rates were lower.

  http://news.bbc.co.uk/2/hi/business/7127534.stm

December 5, 2007:

• Fannie Mae attempts to shore up its capital position by announcing it will issue $7 billion in stock and cut its dividend by 30%.

• Fannie Mae faces capital problems because of the deteriorating US housing market.

  http://www.ft.com/cms/s/0/3920b80c-a2d4-11dc-81c4-0000779fd2ac.html

December 6, 2007:

• George W. Bush announces plans to help homeowners in trouble from the subprime crisis.

• The plan included freezing interest rates on subprime loans for five years.

• The plan would apply to loans taken out between January 2005 and July 2007 and would apply to borrowers who had less than 3% equity in their homes and were no more than sixty days behind on their payments.

  http://www.ft.com/cms/s/0/c43048c4-a467-11dc-a28d-0000779fd2ac.html

• The Royal Bank of Scotland warns that it expects to write down £1.25 billion because of exposure to the US subprime market.

  http://news.bbc.co.uk/2/hi/business/7130161.stm

December 10, 2007:

• UBS announces $10 billion more in write downs associated with their subprime holdings.

• To cover the losses, UBS also reported a capital injection of $11.5 billion from the Singapore government and an unnamed Middle East investor.

• This brings the total write downs for UBS to $13.7 billion so far but an analyst from Deutsche Bank predicted that UBS still has around $9 billion in exposure.

  http://www.marketwatch.com/news/story/ubs-take-further-10-bln/story.aspx?guid=%7B15C6A75F-FE8C-42A4-A24C-DFC139EEB881%7D

  http://www.ft.com/cms/s/0/45e93d6c-a76f-11dc-a25a-0000779fd2ac.html

December 12, 2007:

• The Fed created a Term Auction Facility (TAF) designed to allow banks to get Fed funds by pledging all sorts of collateral.

• The TAF is open to all depository institutions judged to be in sound financial condition. :

• TAF is designed to provide more liquidity to the ailing credit markets.

• The Federal Open Market Committee also approved swap agreements (reciprocal currency arrangements) which will provide $20 billion to the European Central Bank and $4 billion to the Swiss National Bank. These swap lines were approved for up to six months.

  http://www.ft.com/cms/s/0/ccb84dc2-a8bb-11dc-ad9e-0000779fd2ac.html

• The coordinated effort by the world’s central banks to inject liquidity into the financial system was agreed upon at the G-20 meeting, a meeting of the world’s twenty largest economies, last month in Cape Town.

• The outlines of the responses were derived at the G-20 meeting and the central banks had stayed in close contact with each other and were pushed into action as the markets deteriorated last week.

  http://www.ft.com/cms/s/0/58e2e50e-a8c2-11dc-ad9e-0000779fd2ac.html

December 14, 2007:

• CEO of Northern Rock, Adam Applegarth, leaves amid talks about nationalizing the troubled bank.

• Nationalization would allow Northern Rock to shrink its balance sheet without a fire sale of assets.

  http://www.ft.com/cms/s/0/593ebd36-a9e7-11dc-aa8b-0000779fd2ac.html

• Citigroup adds $49 billion back to its balance sheet as it is forced to consolidate struggling off-balance sheet structure investment vehicles (SIVs).

• Citi said that the possible ratings downgrade would make it too difficult for the SIVs to fund themselves.

  http://www.ft.com/cms/s/0/8fcf3e48-a9e7-11dc-aa8b-0000779fd2ac.html

December 18, 2007:

• The Fed backs measures to help subprime borrowers proposed by George W. Bush on December 6.

• Ben Bernanke, the Fed chairman, said the tougher regulations on mortgage lending would benefit both the individuals and the economy.

  http://news.bbc.co.uk/2/hi/business/7150352.stm

• The European Central Bank allocates $502 billion to banks at a below market interest rate to ease the credit crisis.

• The aim is to inject liquidity in the market and cut the cost of lending between commercial and retail banks.

• The ECB was one of five central banks to inject liquidity into the market.

  http://news.bbc.co.uk/2/hi/business/7149329.stm

December 19, 2007:

• Morgan Stanley announces $9.4 billion in write downs from subprime losses.

• To cover the write downs, Morgan Stanley received a capital injection from a Chinese sovereign wealth fund on $5 billion.

  http://www.ft.com/cms/s/0/294ed78a-ae3a-11dc-97aa-0000779fd2ac.html

• S&P ratings cuts ACA Financial Guarantee’s, a small bond insurer, rating from A to CCC.

• This effectively cut off ACA’s ability to insure more debt.

• This was in response to ACA’s third quarter results of large losses on their collateralized debt obligation portfolio.

  http://www.ft.com/cms/s/0/40bc550c-adb1-11dc-9386-0000779fd2ac,s01=1.html

December 20, 2007:

• Bear Stearns reports its first quarterly loss in its 84-year history of $854 million.

• There was a fourth quarter write down of $1.9 billion on Bear’s mortgage holdings.

• CEO Cayne and other top executives do not receive a bonus for 2007.

  http://www.ft.com/cms/s/0/5f7d861c-af02-11dc-880f-0000779fd2ac.html

December 21, 2007:

• Friends Provident, a UK commercial property fund, freezes withdrawals after a severe liquidity crisis caused by an investor run on the fund to get their money out amid subprime fears.

• The fund has £1.2 billion under management and tells investors it could take up to six months to get their money out.

• This is significant because it is the first property fund to freeze withdrawals since the last property crash 15 years ago.

  http://www.ft.com/cms/s/0/0c7e8112-af3b-11dc-880f-0000779fd2ac.html

* The entries in this timeline are drawn directly or indirectly from press reports cited in the timeline

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