Financial Crisis Timeline*

Page 3: July - December 2008

The university of Iowa center for international finance & Development

Prepared by Jason Cox and Laurie Glapa

Last updated: July 1, 2009

 

July 1, 2008:

• The Treasury in England announces new legislation covering financial stability, failing banks, and depositor protection in an attempt to avoid another Northern Rock situation.

• The new guarantee scheme raises the deposits covered from £35,000 to £50,000.

• The Treasury, Bank of England, and Financial Services Authority are hoping the higher protection will prevent any runs on the banks.

  http://www.ft.com/cms/s/0/3aa01c78-4760-11dd-93ca-000077b07658.html

July 2, 2008:

• In a speech to the Chatham House in the UK, US Secretary of the Treasury, Henry Paulson, warned companies that they couldn’t depend on a government bailout if their bets go badly.

• Mr. Paulson also said that regulators need more authority to step in and liquidate investment banks to limit temporary disruptions similar to what the FDIC has over deposit banks.

  http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aAsOy1NUvRPw

  http://www.treas.gov/press/releases/hp1064.htm

July 4, 2008:

• The Financial Services Authority (FSA) of the UK sets up a rescue plan for mortgage lender Bradford & Bingley (B&B) after TPG Capital, a US private equity group, pulled out of a deal to invest £179 million.

• TPG walked away after a ratings downgrade from Moody’s has made B&B one of the lowest rated out of any of the large European banks.

• Once TPG walked away, the FSA scrambled to find four private institutions willing to step into the shoes of TPG and provide the necessary funding.

  http://www.ft.com/cms/s/0/476a1f5e-4a02-11dd-891a-000077b07658.html

July 7, 2008:

• The word “subprime” is officially added to the English language as Merriam-Webster Inc. adds it to the new edition of the collegiate dictionary.

• Webster defines subprime as “1: having or being an interest rate that is higher than a prime rate and is extended especially to low-income borrowers; 2: extending or obtaining a subprime loan.”:

• Merriam-Webster first found the word subprime used in a English language publication in 1995.

  http://www.boston.com/news/local/massachusetts/articles/2008/07/07/new_words_in_the_merriam_webster_dictionary/

July 8, 2008:

• Shares in Fannie Mae and Freddie Mac plunged around 20% as investors sell off their shares.

• The cause was a report by a Lehman Brothers analyst who said that the government backed mortgage financers could be forced to raise up to $75 billion in fresh capital because of accounting changes.

• The analyst, Bruce Harting, said that the changes under discussion by the Federal Accounting Standards Board (FASB) could force Freddie and Fannie to bring securitized mortgages back onto their balance sheets resulting in a total of $75 billion in regulatory capital charges.

• Lehman said they believed that Fannie and Freddie would be exempt from the accounting change but investors still sold off.

  http://www.ft.com/cms/s/0/69066b72-4c87-11dd-96bb-000077b07658.html

• The SEC says credit rating agencies failed to manage conflicts of interest in assigning ratings to the complex financial instruments backed by subprime mortgages.

• The findings of the SEC probe follow months of examinations to determine whether the rating agencies diverged from their usual procedures to publish higher ratings for complex financial products.

• The SEC chairman, Christopher Cox, said that the volume of rating requests caused employees to cut corners in rating the complex securities.

  http://www.ft.com/cms/s/0/1d0ea8a8-4c80-11dd-96bb-000077b07658,dwp_uuid=5fd271ee-61f6-11dc-bdf6-0000779fd2ac.html

July 9, 2008:

• EU finance ministers approve moves to impose more stringent regulation on credit rating agencies.

• The ministers support plans by EU internal market commissioner Charlie McCreevy to require the credit agencies, who want to operate in the EU, to register with EU regulators for strengthened overview.

• Dutch Finance Minister, Wouter Bos said the credit rating agencies were the cause of the current credit crisis and needed more transparency.

  http://www.guardian.co.uk/world/2008/jul/09/eu.creditcrunch

  http://uk.reuters.com/article/mediaNews/idUKL0852772820080708

July 10, 2008:

• Mark Clare, chief executive of Barrat Developments (one of the UK’s largest housebuilders) warns that job cuts in the sector could reach 60,000 of the 300,000 employees employed directly and indirectly in the housebuilding sector.

• Barrat announced it would cut 1,200 out of its 6,700 employees.

• On the same day, Halifax, a UK mortgage lender, said housing prices were 6.1% lower in June than a year ago.

  http://www.ft.com/cms/s/0/985e76ba-4eb4-11dd-ba7c-000077b07658,dwp_uuid=18a58248-385b-11dd-8aed-0000779fd2ac.html

July 12, 2008:

• IndyMac bank closes down after being unable to meet demands for withdrawals by customers.

• The bank, with assets of $32 billion, becomes the second largest US financial institution to close down, ranking behind Continental Illinois National Bank & Trust Company which closed down in 1984 with $40 billion in assets.

• The bank’s operations have been transferred to the Federal Deposit Insurance Corporation (FDIC), which insures depositors for up to $100,000 in deposits.

• The FDIC is estimating the rescue will cost between $4 to $8 billion.

• New York Senator, Charles Schumer, blamed the Office of Thrift Supervision (OTS) for the failure to recognize IndyMac’s risky lending practices. OTS was the bank’s main regulator.

  http://www.ft.com/cms/s/0/8eca3530-4f9f-11dd-b050-000077b07658,dwp_uuid=698e638e-e39a-11dc-8799-0000779fd2ac.html

July 13, 2008:

• Investor speculation on the Freddie Mac and Fannie Mae bailout worsen the situation.

• Investors (including large hedge funds) employ the “take-under” strategy which includes short selling the stock, causing the shares to fall further and investing the proceeds in the company’s debt.

• These investors believe that the government will allow the companies to fail but then bail out the debt holders to protect the financial market.

  http://www.ft.com/cms/s/0/921217f2-510d-11dd-b751-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html

• The US Treasury and Federal Reserve release a roadmap on how to protect Freddie Mac and Fannie Mae from insolvency.

• Because of their need for short-term financing, the mortgage companies are largely vulnerable to a sudden loss of market confidence in carrying out their day to day business.

• Although the government did not announce a detailed bail out package, they made it clear that they will provide a liquidity backstop if needed.

• The Treasury also conceded that this may include an large injection of public funds.

  http://www.ft.com/cms/s/0/898e6482-510d-11dd-b751-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html

July 14, 2008:

• More details surface about the rescue plan to save Freddie Mac and Fannie Mae proposed by Henry Paulson.

• The government said that it will approach Congress for the authority to give unlimited funds to make sure that Fannie Mae and Freddie Mac do not fail.

• The Federal Reserve announced it will provide Freddie and Fannie emergency funds on the same terms as banks should it become necessary.

• Mr. Paulson outlined a three point plan to resolve the crisis at the ailing mortgage lenders: 1) the Treasury will be authorized to increase the current $2.25 billion lines of credit to Freddie and Fannie, 2) the Treasury will have the power to purchase equity in the companies if necessary, and 3) the entities will have access to borrowing from the Fed’s discount window. All three are at the discretion of the Treasury Secretary.

  http://www.ft.com/cms/s/0/5773a770-5106-11dd-b751-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html

July 15, 2008:

• In an effort to prevent bankruptcy and get paid, trading partners with ACA Capital enter into the sixth “forbearance agreement”.

• The insolvent bond insurer received an August 11 deadline to pay claims on CDOs.

• The original “forbearance agreement” was entered into on January 21.

  http://www.marketwatch.com/news/story/aca-capital-enters-sixth-forbearance/story.aspx?guid=%7BC243B64E-FCB9-4437-97F7-3745B1D7A526%7D&dist=hppr

July 16, 2008:

• Wells Fargo, the fifth largest US bank, reports better than expected second quarter earnings.

• Net income rose to 53 cents per share beating estimates of 49 cents per share.

• Despite falling earnings, the bank has managed to remain profitable during the credit crisis and actually increased its dividend by 10%.

• Write offs totaled $1.51 billion for the second quarter.

  http://www.ft.com/cms/s/0/4948bc66-5350-11dd-8dd2-000077b07658.html

  http://www.reuters.com/article/businessNews/idUSWNAB088120080716?pageNumber=2&virtualBrandChannel=0

• One of Spain’s largest property companies, Martinsa-Fadesa, files for bankruptcy.

• The company decided to file for bankruptcy after failing to raise equity needed to complete a €4 billion debt refinancing with banks. :

• It is unknown the specific amount of write downs that will follow because of loan exposure by Spanish banks but the largest Spanish bank, La Caixa, announced it had already set aside €192 million to cover its €700 million exposure.

  http://www.ft.com/cms/s/0/7defd5f6-52d0-11dd-9ba7-000077b07658.html

July 17, 2008:

• Richard Holbrooke, a director at the American International Group (AIG), resigns.

• AIG was looking to bring in a new team after two straight quarters of financial losses due to their exposure to credit default swaps.

  http://www.marketwatch.com/news/story/american-international-group-director-holbrooke/story.aspx?guid=%7BA04055AA-E762-4C2B-BA63-488AD0BA152F%7D&dist=hpts

  http://www.bloomberg.com/apps/news?pid=20601203&sid=aIpUxO6Q1EoQ&refer=insurance

• Merrill Lynch (ML) announces write downs of $9.4 billion primarily on its mortgage related assets and hedges with troubled bond insurers.

• ML still has $50 billion in collateralized debt obligations, subprime mortgages, and real estate assets that could lead to further write downs in the future.

• ML has had a tough year posting a loss of almost $19 billion in the last four quarters including the $4.6 billion loss in the second quarter.

• Along with reporting the loss, ML also announced a sell off of $8 billion in assets to raise much needed capital.

  http://www.ft.com/cms/s/1/fa85e88e-543e-11dd-aa78-000077b07658.html

  http://www.ft.com/cms/s/0/2a609bac-543b-11dd-aa78-000077b07658.html

• JP Morgan Chase announces stronger than expected earnings despite $2.4 billion in write downs in the second quarter of 2008.

• JPMC posted a net income of $2 billion or 54 cents a share compared to analysts expectations of 44 cents a share.

• This is compared to the $1.20 a share income posted for the same period last year.

  http://www.ft.com/cms/s/0/81c96f6a-53f3-11dd-aa78-000077b07658.html

• Goldman Sachs announces earnings of $2.1 billion, well ahead of analyst expectations.

• Goldman reported losses of $775 million on non-investment grade credit origination along with gains in equity underwriting and security services.

  http://www.ft.com/cms/s/0/54ec522a-3c68-11dd-b958-0000779fd2ac.html

July 19, 2008:

• Citigroup announces better than expected earnings for the second quarter of 2008.

• Citigroup announced losses of $2.5 billion after second quarter write downs of $7.2 billion in bad debt. :

• This is significantly better than the analysts thought as they predicted $3.67 billion in losses.

• Citigroup shares jumped 7.7% on the news.

  http://www.ft.com/cms/s/0/4dd5433c-5529-11dd-ae9c-000077b07658.html

July 20, 2008:

• Financial Times reports that the SEC approved registering the proposed $5.5 billion stock offering by Freddie Mac.

• David Nason, a US treasury official, praised Freddie Mac in its efforts to raise capital from private sources after the government proposed a bail out plan.

  http://www.ft.com/cms/s/0/280b6afc-5694-11dd-8686-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html

July 21, 2008:

• Bank of America (BofA) announces better than expected second quarter earnings.

• BofA earnings were 72 cents a share compared to the analysts expectations of 52 cents per share, still 41% lower than last year.

• Write offs totaled $3.6 billion for BofA in the second quarter

  http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=ACBJ&date=20080721&id=8918617

July 22, 2008:

• Federal researchers say that the Freddie Mac and Fannie Mae bail out plans proposed by the government could cost the taxpayers up to $25 billion.

• The fiscal impact report prepared by the Congressional Budget Office stated there was a 50% chance that the US would not have to bail out Freddie and Fannie in the next 18 months but there is also a 5% chance that the treasury would have to cover $100 billion in losses if the mortgage market keeps getting worse.

• US mortgage rates reach their highest levels in a year on speculation that Freddie and Fannie will cut back their purchases of home loans and mortgage securities.

  http://www.ft.com/cms/s/0/e4d3806c-5814-11dd-b02f-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html

• Wachovia declares an $8.9 billion dollar loss in the second quarter of 2008.

• The loss was the largest in company history and marks the first time for losses in consecutive quarter.

  http://www.ft.com/cms/s/0/34e70006-57ed-11dd-b02f-000077b07658,dwp_uuid=ffa475a0-f3ff-11dc-aaad-0000779fd2ac.html

July 23, 2008:

• The U.S. House of Representatives passed a housing bill which contained a rescue plan for Freddie Mac and Fannie Mae along with giving the government power to guarantee up to $300 billion in mortgages refinanced through the Federal Housing Administration.

• Bush and the White House originally threatened to veto the bill because of the potential cost to taxpayers but changed stances in order to get a Freddie and Fannie rescue plan through Congress and into law.

  http://www.ft.com/cms/s/0/2ac82632-58b9-11dd-a093-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html

• The Basel Committee on Banking Supervision proposes rules to change a regulatory loophole that allowed banks to own complex assets that helped exacerbate the credit crisis.

• The proposed incremental risk charge (IRC) would make it more costly for banks to hold these structured debt products.

• SEC chairman, Christopher Cox, said the IRC would also apply to investment banks.

  http://www.ft.com/cms/s/0/acc466a8-5848-11dd-b02f-000077b07658.html

• Northern Rock, the troubled British mortgage company that was nationalized by the British government in February, hires Gary Hoffman as its new chief executive.

• Mr. Hoffman, a former Barclays director, replaces the current chief, Andy Kuipers.

  http://www.ft.com/cms/s/0/2e02ebfc-58aa-11dd-a093-000077b07658,dwp_uuid=74d73d92-650f-11dc-bf89-0000779fd2ac.html

July 24, 2008:

• Andrew Cuomo, the N.Y. State Attorney General files charges against UBS senior officials for selling more than $21 million of their personal holdings of auction-rate securities and falsely marketing them as safe and liquid.

• The auction-rate security market started faltering in February as dealers stopped taking the unsold securities in the auctions they managed.

  http://www.ft.com/cms/s/0/0fbf2a3e-59b8-11dd-90f8-000077b07658,dwp_uuid=eddfd4e0-4bc3-11da-997b-0000779e2340.html

July 26, 2008:

• Washington Mutual announces a $10 billion capital infusion to its balance sheet to try to stop speculation over its financial health.

• The money was borrowed from the Fed’s discount window, the Federal Home Loan Banking System, and open market operations.

  http://www.ft.com/cms/s/0/47d815de-5a9e-11dd-bf96-000077b07658.html

July 27, 2008:

• Alistair Darling, the UK Chancellor, considers extending the Bank of England’s mortgage plan where high quality mortgage backed securities are exchanged for government bonds.

• Mr. Darling said this will inject capital into the ailing credit markets and providing government financing should increase the volume of lending along with driving borrowing costs down.

• The current scheme applies only to mortgage assets held at the end of 2007; extending it to new mortgages would hopefully boost the housing market.

  http://www.ft.com/cms/s/0/3f6ecf00-5c0b-11dd-9e99-000077b07658.html

July 28, 2008:

• Merrill Lynch announces an $8.5 billion share offering to help cover the $5.7 billion fire sale of toxic mortgage securities.

• At the end of the second quarter, ML had estimated the value of these CDOs at $11.1 billion but ended up selling to Lone Star Funds for $6.7 billion.

  http://www.ft.com/cms/s/0/3bf7930e-5cf4-11dd-8d38-000077b07658.html

• Research by the Financial Services Authority of the UK reveals that financial education is unlikely to lead to better outcomes.

• The research comes out two years into a £90 million five year program to make Britons more financially capable.

• Overall the research showed little evidence that the financial education programs changed student behavior.

  http://www.ft.com/cms/s/0/9a1b132a-5c31-11dd-9e99-000077b07658.html

July 29, 2008:

• US home prices drop 15.8% in May according to Standard & Poor’s index reports.

• This is the steepest one month drop since the index was started eight years ago—eclipsing the 15.3% drop in April.

  http://www.ft.com/cms/s/0/50694c38-5d71-11dd-8129-000077b07658.html

• Trade partners of SCA, an insolvent bond insurer, agree to drop their claims for cash to allow the monoline to avoid being taken over by the US insurance regulator.

• One of the trade partners, Merrill Lynch, agreed to throw away its $3.5 billion in insurance claims for $500 million in cash.

• 13 other banks entered into negotiations to drop their claims in exchange for cash.

  http://www.ft.com/cms/s/0/9310db1e-5d94-11dd-8129-000077b07658,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html

July 30, 2008:

• The Fed announces it will provide extra liquidity support for primary dealers.

• The support includes; 1) 3-month cash loans to banks, 2) a new auction facility, and 3) extended access for investment banks and other primary dealers to emergency cash and loans of treasury securities until January 30.

  http://www.ft.com/cms/s/0/a9dba646-5e41-11dd-b354-000077b07658,dwp_uuid=4034778a-37aa-11dd-aabb-0000779fd2ac.html

• The SEC extends the ban on “naked short-selling” until August 12.

• This technique allows investors to bet on a stock falling without having to pay interest and can lead to increased speculation.

• The ban included “naked short-selling” on Fannie Mae, Freddy Mac, and 17 large bank stocks to help stabilize their share price.

  http://www.ft.com/cms/s/0/608f5210-5dee-11dd-8129-000077b07658.html

July 31, 2008:

• Deutsche Bank reveals more write downs bringing the total so far to $7.8 billion for this year.

• The write downs included €1 billion on residential mortgage-backed securities, €500 million relating to monoline insurers, and €300 million in commercial real-estate.

• Without figuring in the write downs, Deutsche corporate banking and securities division would have an income 16% less than the second quarter of last year.

  http://www.ft.com/cms/s/0/2e3720ee-5ec6-11dd-91c0-000077b07658.html

• The European Committee (EC) outlines a plan to reform ratings agencies.

• The EC said that the rating agencies should be subject to a single supervisory regime in order to operate in Europe.

• The 12 recommendations of the Securities Industry and Financial Markets Association taskforce focus on better disclosure and transparency for the industry and are meant to combat the failures of the current system of voluntary self-regulation.

  http://www.ft.com/cms/s/0/1ccdc27c-5f2f-11dd-91c0-000077b07658,dwp_uuid=5fd271ee-61f6-11dc-bdf6-0000779fd2ac.html

• An 80 page complaint by Massachusetts’s Secretary of State, William Galvin, accuses Merrill Lynch of fraud in their selling techniques of auction-rate securities (ARS).

• The complaint claimed that research analysts were being censored to not warn possible investors of the risks of ARS while the company was aggressively selling them.

  http://www.ft.com/cms/s/0/cc6768f8-5f4a-11dd-91c0-000077b07658.html

• Nationwide Building Society in the UK releases data showing a drop in monthly housing prices of 8.1% compared to July of last year.

• This is the fastest decline since Nationwide started keeping monthly figures in 1991, significantly more than the 6.3% recorded in June. :

• With housing demand low, more stringent requirements being applied to mortgage applicants, and wholesale funding scarce and expensive, the estimates are that housing prices will continue to decline in the foreseeable future.

  http://www.ft.com/cms/s/0/937290bc-5ec9-11dd-91c0-000077b07658.html

August 1, 2008:

• The Federal Deposit Insurance Corporation (FDIC) issues cease and desist orders to four small US banks.

• The fours banks were: 1) MetroPacific Bank in Irvine, CA, 2) Bank Haven in Haven, KS, 3) Clarkston State Bank in Clarkson, MI, and 4) Hastings State Bank in Hastings, NE. :

• The FDIC said the banks need to raise more capital, expand their loss allowances, and better oversee and diversify their loan portfolios to prevent bankruptcy.

  http://www.ft.com/cms/s/0/f52c86b4-6018-11dd-805e-000077b07658.html

August 4, 2008:

• David Aufhauser resigns as general counsel to UBS’s investment banking division.

• The N.Y. Attorney General, Andrew Cuomo, accused him along with other top level UBS officials as selling their personal holdings in auction rate securities on insider information.

  http://www.ft.com/cms/s/0/0ab60a76-6255-11dd-9ff9-000077b07658.html

• HSBC, a UK bank, cautions that the credit crisis is starting to leak over into Asia.

• HSBC’s chairman, Stephen Green, said that the bank was beginning to see signs of slowdowns in India and Vietnam.

  http://www.ft.com/cms/s/0/a168f158-620b-11dd-9ff9-000077b07658.html

August 5, 2008:

• Northern Rock, the British nationalized mortgage lender, is expected to report first half losses of $500 million.

• Most of these losses are tied to bad debts in its UK mortgage book.

• This far exceeds the $199 million loss reported for all of 2007.

  http://www.ft.com/cms/s/0/d6e44576-6279-11dd-9a1e-000077b07658.html

• Investors express concern over the government taking on £3.4 billion in extra risk to help bail out Northern Rock.

• The bank said it was swapping £3 billion of its Bank of England debt and 400 million of preference shares for equity.

• This debt-for-equity swap means that investors will get the £3.4 billion back only if Northern Rock is sold into the private sector or if the bank repatriates excess capital.

• Northern Rock announced it has reduced its original Bank of England loan from £26.9 billion to £17.5 billion.

  http://www.ft.com/cms/s/0/74841f04-627f-11dd-9a1e-000077b07658,dwp_uuid=74d73d92-650f-11dc-bf89-0000779fd2ac.html

August 6, 2008:

• In response to the credit crisis, some of the world’s largest banks propose reforms that would limit the size and scope of their business.

• Headed by Gerald Corrigan, managing director of Goldman Sachs, the study was backed by JP Morgan Chase, Merrill Lynch, Citigroup, HSBC, Lehman Brothers, and Morgan Stanley.

• The proposals will limit the number of investors who can buy complex financial products, bring more derivative instruments into regulator’s sights, and call on the banks to spend more money on technology and risk management.

• Under the proposal, only highly sophisticated investors would be able to purchase complex financial products such as auction rate securities.

  http://www.ft.com/cms/s/0/94dc3528-63c6-11dd-844f-0000779fd18c.html

August 7, 2008:

• UK housing prices fell 11% from January to July 2008.

• Compared to last year, the house prices were 10.9% lower, which is the first double digit monthly drop, year-on-year, in the history of the Halifax House Pricing Index.

  http://www.ft.com/cms/s/0/cdc05c4c-6458-11dd-af61-0000779fd18c.html

• AIG shares drop 19.1%, its biggest daily drop in 39 years, after announcement of a higher than expected $5.4 billion loss for the second quarter.

• This loss was blamed on AIG’s exposure to large subprime write downs.

  http://www.ft.com/cms/s/0/c5ae859e-647e-11dd-af61-0000779fd18c.html

• Barclays offloads £6.3 billion in troubled loans and securities in a move to transfer the risk of the credit crunch off its balance sheet.

• Sales were consistent with Barclays balance sheet valuations and did not require the bank to provide financing signifying that investors are willing to buy debt assets affected by the credit crunch.

  http://www.ft.com/cms/s/0/b58e46dc-6446-11dd-af61-0000779fd18c,dwp_uuid=bfce0fae-de0b-11dc-9de3-0000779fd2ac.html

August 8, 2008:

• Fannie Mae announces a $2.3 billion second quarter loss and slashes its dividend.

• The mortgagor said we are experiencing the worse housing market in 70 years that said defaults in July were higher than any other month in the second quarter.

• Fannie Mae and Freddy Mac owns or guarantees around $5,300 billion in US mortgages.

  http://www.ft.com/cms/s/0/9446fdc0-6572-11dd-a352-0000779fd18c.html

• Citigroup and Merrill Lynch agree to buy up to $20 billion in auction-rate securities (ARS).

• ARS are long-term debts issued by municipalities and others whose interest rates are set at bank-backed auctions.

• Citigroup said it would buy back $7.5 billion worth of ARS and Merrill Lynch announced a buyback of up to $12 billion.

• The banks reacted to pressure from regulators who had initiated probes into the stale ARS market. :

• The banks that supported the ARS market stopped doing so in February, causing the market to collapse and regulators claim that the banks that continued to sell ARS misrepresented them as liquid, cash-like instruments.

  http://www.ft.com/cms/s/0/a91a4076-64d8-11dd-af61-0000779fd18c.html

  http://www.ft.com/cms/s/0/a97b97ac-64a8-11dd-af61-0000779fd18c,dwp_uuid=4da69efc-1b8f-11dd-9e58-0000779fd2ac.html

• The Royal Bank of Scotland announces a £691 million loss, the third largest in UK banking history.

• Any profits were wiped out by the £5.9 billion in write downs linked to subprime US mortgages.

• The bank announced that they were close to replacing three directors and speculators believe this is the first step in the eventual replacement of CEO, Sir Fred Goodwin.

  http://www.ft.com/cms/s/0/7bcfafe0-6512-11dd-a352-0000779fd18c.html

• The Council of Mortgage Lenders releases data showing 19,000 homes repossessed in the UK in the last six months.

• This is a 40% jump from 2007 and the highest level since the mid nineties.

  http://www.thisislondon.co.uk/standard/article-23529485-details/19,000+homes+are+repossessed+in+past+six+months/article.do

August 9, 2008:

• UBS reaches an agreement with regulators to repurchase $19 billion of ARS debt.

• The ARS market was estimated around $330 billion before crashing in February when the banks quit supporting the market.

• The agreement also settles the civil lawsuits brought by the N.Y. Attorney General, Andrew Cuomo, earlier this August against UBS for misrepresenting the ARS.

  http://www.ft.com/cms/s/0/84cae422-656a-11dd-a352-0000779fd18c.html

August 10, 2008:

• Financial Times reports that the Royal Bank of Scotland is involved in a sale of loans from their balance sheet of $8 billion.

• The buyout is led by Apollo, Blackstone, and TPG—all private equity firms.

• Although the exact percentage is not disclosed, Blackstone’s president, Tony James, reported that the buyers could expect to make up to 30% on the deeply discounted loans.

  http://www.ft.com/cms/s/0/1aa1aee4-6710-11dd-808f-0000779fd18c.html

August 11, 2008:

• N.Y. Attorney General, Andrew Cuomo, rejects Morgan Stanley’s offer to buy back $4.5 billion in auction-rate securities (ARS) as too little too late.

• The result being that the investigation into Morgan Stanley’s sale practices of ARS will continue with possible lawsuits upcoming.

  http://www.ft.com/cms/s/0/538768f6-67d9-11dd-8d3b-0000779fd18c.html

• A Moody’s report shows that UK subprime defaults jump.

• This report shows that the default rate on UK subprime mortgages increased from 7.3% in the second quarter of 2007 to 10% in the second quarter of 2008.

• UK housing prices have fallen 8.5% so far in 2008 and mortgage lenders predict a 20% drop by the end of 2009.

  http://www.ft.com/cms/s/0/2ac04318-67cd-11dd-8d3b-0000779fd18c.html

• Data from the Building Societies Association shows that mortgage repayments outstripped new loans by £700 million in June.

• The Bank of England says this is unprecedented, never before has net lending in the mortgage market been negative.

• This trend shows the extreme conservatism of mortgage lenders in the UK in response to the subprime credit crisis.

  http://www.ft.com/cms/s/0/e8be25d2-672e-11dd-808f-0000779fd18c.html

August 12, 2008:

• UK mortgage broker, Omotayo Fawole, was fined £100,000 for fraud and banned by the Financial Services Authority.

• Mr. Fawole is the 18^th broker to be banned by the FSA this year compared to six total for all of last year.

• The FSA findings show that Mr. Fawole overstated earnings and profits in mortgage applications.

  http://www.ft.com/cms/s/0/fdfb8352-67fd-11dd-8d3b-0000779fd18c.html

• Banks still remain exposed to risk in the buyout deals to remove risky mortgage assets from their balance sheets.

• This year, banks such as Citigroup, Deutsche Bank, and Royal Bank of Scotland have unloaded between $25-30 billion in bad loans to three major private equity groups: Apollo, Blackstone, and TPG.

• The deals averaged discounts of 85 cents on the dollar for the loans.

• The banks still retain some of the downside risk on these loans. The deals are structured so the private equity companies are at risk for the first losses, up to 20 cents on the dollar, but then any additional losses are shared with the banks.

  http://www.ft.com/cms/s/0/89610f9a-6892-11dd-a4e5-0000779fd18c.html

• JP Morgan Chase reports a $1.5 billion write down in July.

• Bankers said that July was the worst month for mortgage-backed bonds since the beginning of the subprime crisis.

• JPMC said that the trading conditions of the mortgage market had seriously deteriorated in July from cut-price sales and waning investor demand.

  http://www.ft.com/cms/s/0/5b3f0ea2-67fa-11dd-8d3b-0000779fd18c.html

• Bloomberg reports that total losses related to the failure of the US subprime mortgage market top $500 billion.

  http://www.bloomberg.com/apps/news?pid=20601087&sid=a8sW0n1Cs1tY&refer=home

August 13, 2008:

• UK inflation rate exceeds the bank interest rate for the first time in twenty-seven years.

• This is a large warning sign for the Bank of England who will likely respond by raising interest rates to control inflation instead of lowering them more to ease the credit crunch.

• Britain currently has a negative real interest rate after the Bank of England has been lowering them consistently in response to the problems the credit crisis has created to the UK financial system.

  http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/13/cncpi113.xml&CMP=ILC-mostviewedbox

• A website keeping track of the “implode-o-meter” shows that 273 major US lending operations have “imploded” since late 2006.

• In addition, eighteen lenders are on the ailing/watch list including Freddie Mac and Fannie Mae.

  http://ml-implode.com/

August 19, 2008:

• Former IMF chief economist, Kenneth Rogoff, warns that the credit crunch may lead to the failure of a large US bank within months.

• Professor Rogoff believes the worse of the credit crisis is yet to come and we will likely see a high-profile casualty among American banks. :

• Mr. Rogoff said the credit crisis will likely lead to consolidation in the US financial sector and Fannie Mae and Freddie Mac will cease to exist in their present form.

  http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece

August 20, 2008:

• Lehman Brothers holds secret talks to sell up to 50% of its shares to South Korean or Chinese investors.

• Talks reportedly broke down because Lehman was asking too high of a price.

• Shares in Lehman Brothers have fallen almost 85% since early 2007.

  http://www.ft.com/cms/s/0/586ed412-6ee6-11dd-a80a-0000779fd18c.html

August 27, 2008:

• Bloomberg releases table showing a total of $506.1 billion in asset writedowns and credit losses from the collapse of the US subprime mortgage market.

• The table also shows that the banks have raised $352.6 billion to cover their writedowns.

• The table breaks down the individual numbers of over fifty banks.

  http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDmQ66OoJbfw

August 28, 2008:

• Fannie Mae announces a management restructuring plan that would put new executives in charge of its plan to improve capital management and cut credit losses.

• David Hisey becomes the new CFO and Michael Shaw the new chief risk officer.

  http://www.ft.com/cms/s/0/771992dc-748e-11dd-bc91-0000779fd18c.html

September 7, 2008:

• The US government takes control of Freddie Mae and Fannie Mac in what could become the world’s largest financial bail-out.

• The plan included the government injecting $100 billion to ensure the troubled mortgage lenders would be able to meet their debts.

• The government also said it would buy mortgage bonds backed by the companies starting with $5 billion and provide unlimited liquidity until the end of next year.

• Shares will continue to trade on the two companies but current shareholders will face the prospect of massive dilution.

• To lower future risk to taxpayers, the government will allow Fannie and Freddie to grow up to $850 billion each but starting in 2010 they will be required to shrink their portfolios by 10% a year until they reach $250 billion.

• Currently, Freddie and Fannie have $5,400 billion in outstanding liabilities and guarantee three-quarters of all new US mortgages.

  http://www.ft.com/cms/s/0/3a4cb13a-7d04-11dd-8d59-000077b07658.html

September 8, 2008:

• Washington Mutual ousts CEO, Kerry Killinger, and replaces him with Alan Fishman.

• Washington Mutual has had large exposure to the credit crisis and its share price has dropped from $40 to $3 since the summer of 2007.

• Analysts expect Mr. Fishman to look into opportunities to sell the company.

  http://www.ft.com/cms/s/0/d46730bc-7da7-11dd-bdbd-000077b07658.html

• Bloomberg News reports that the global slowdown from the subprime mortgage collapse has wiped out more than $17 trillion in global equity value.

  http://www.bloomberg.com/apps/news?pid=20601087&sid=aq8tCTiwjJmY&refer=home

September 10, 2008:

• Fannie Mae sells $7 billion worth of bonds mainly to domestic investors.

• This is its largest syndicated benchmark note ever.

• Fannie paid a risk premium of 70 basis points over comparable Treasuries which is a sharp drop from similar bond sales last month.

• The bonds have a two-year maturity which falls within the timeframe that the US government has explicitly planned to provide a backstop for both Fannie Mae and Freddie Mac.

  http://www.ft.com/cms/s/0/96c2d980-7f5c-11dd-a3da-000077b07658.html

• A study finds plaintiffs filed 607 civil cases tied to the subprime crisis in federal courts during 18 months ending June 2008.

• This compares with the 559 federal cases in six years from the fall-out of the savings and loans crisis of the 1980s. :

• A partner at Arnold and Palmer says the trend is even worse because the study does not account for all of the lawsuits being filed in state courts.

  http://www.ft.com/cms/s/0/fbb80348-7f5b-11dd-a3da-000077b07658.html

• The US government takeover of Freddie Mac and Fannie Mae could lead to a default of up to $500 billion in credit default swaps.

• Estimates say these contracts will likely be sold for 95 cents on the dollar resulting in up to $25 billion in losses to the insurance companies and banks who recently offered protection against a default.

  http://www.ft.com/cms/s/0/59477edc-7f5f-11dd-a3da-000077b07658.html

September 11, 2008:

• Lehman Brothers announces plans to shrink its size to survive the credit crisis.

• The plan includes selling off its asset management unit and spinning-off $30 billion of troubled property assets. :

• The news came after Lehman reported its worse loss ever of $3.9 billion for the third quarter spurred by $7.8 billion in credit-related writedowns.

• CEO Dick Fuld told analysts that Lehman was in one of its toughest periods in its 158 year history but would pull through.

  http://www.ft.com/cms/s/0/c4cb3b92-7f98-11dd-a3da-000077b07658.html

September 13, 2008:

• Major banks devise a rescue package to buy Lehman Brothers.

• Bank of America is seen as the leading contender and it is considering a joint takeover bid with JC Flowers and China Investment Co., the Chinese sovereign wealth fund.

• Both Moody’s and Standard & Poor’s have said they will cut Lehman’s credit ratings if the bank fails to find a buyer, further crippling Lehman’s ability to raise funds.

  http://www.ft.com/cms/s/0/306f879c-812c-11dd-82dd-000077b07658.html

• The US Treasury and Federal Reserve refuse to use public funds to close a rescue for Lehman Brothers.

• Analysts highlight three important differences between the Lehman situation and the government’s bailout of Bear Sterns: 1) Lehman’s business mix differs from Bear’s, 2) there is less systematic risk with a Lehman’s failure because financial institutions have had six months to prepare for the failure, and 3) the Fed now has in place an emergency liquidity facility to allow Lehman to wind down business operations in a way that will not cause shocks to the markets.

  http://www.ft.com/cms/s/0/c83d1138-812d-11dd-82dd-000077b07658.html

September 14, 2008:

• Merrill Lynch enters into talks to be acquired by Bank of America.

• This comes after Bank of America removed itself from the bidding for Lehman Brothers because the government refused to supply financial help.

• People close to the situation say the per share price of Merrill could command a large premium and possible reach $30 (current market price of $17.05).

• Merrill’s shares have fallen almost 70% this year.

  http://www.ft.com/cms/s/0/0ba5fbd8-82a0-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• American International Group (AIG) seeks to raise $10-20 billion in equity from private investors to shore up its balance sheet.

• The private investors include Kohlberg Kravis Roberts, Texas Pacific Group, and JC Flowers.

• AIG also petitioned the Fed to borrow from the discount window to help stabilize its business operations.

• Because of its exposure to the real estate and credit default swaps market, the ratings agencies have threatened to downgrade AIG if it does not raise the much needed capital.

  http://www.ft.com/cms/s/0/ef3a1e16-8286-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

September 15, 2008:

• Lehman Brothers announces it will file for Chapter 11 bankruptcy as acquisition talks with Bank of America break down.

• The filing does not include Lehman’s broker-dealer operations, which Lehman is looking into selling.

  http://www.ft.com/cms/s/0/52098fa2-82e3-11dd-907e-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• Ten of the world’s largest banks agree to pool $70 billion in a liquidity fund to mitigate the expected failure of Lehman Brothers.

• The ten banks involved are Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Merrill Lynch, Morgan Stanley, and UBS. :

• Each of the banks will be able to borrow up to one third of the fund by pledging a wide range of collateral that is not accepted for Fed loans.

• The Fed also relaxed regulations and said it would allow a broader range of collateral for Fed loans and it will also suspend the rule that prohibits deposit-taking banks from using deposits to help finance their investment banking subsidiaries until January 30, 2009.

  http://www.ft.com/cms/s/0/136a27d8-82d0-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• Bank of America and Merrill Lynch enter into an agreement where Merrill Lynch will be acquired for $50 billion.

• The all stock transaction signaled to the market that investment banks were scrambling to find partners after learning the fate of competitor Lehman Brothers.

• The offer by Bank of America was 70% higher than Merrill’s stock price at the close on Friday.

  http://www.ft.com/cms/s/0/0ba5fbd8-82a0-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• The European Central Bank (ECB) allots €30 billion in one-day liquidity to counter the effects of Lehman Brothers bankruptcy.

• The Bank of England said it would offer £5 billion of extra reserves to help stabilize the markets.

• Both banks said that European banks will now be short of cash because of all the money that the banks lent to Lehman Brothers will now be tied up in bankruptcy proceedings.

  http://www.ft.com/cms/s/0/6e90abdc-82f8-11dd-907e-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• A deal between AIG and New York insurance regulators allows the insurance company to access $20 billion of assets from its subsidiaries in an attempt to add liquidity and prevent a credit downgrade.

• Despite the deal, all of the major rating agencies downgraded AIG’s long term debt which could trigger billions of dollars in collateral payments on its derivative trades.

• AIG’s stock price finished down more than 60% on the day.

  http://www.ft.com/cms/s/0/abaf3dee-834d-11dd-907e-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

September 16, 2008:

• The US Federal Reserve announces it will lend AIG $85 billion in emergency funds.

• The plan includes giving the government control with a 79.9% stake in the company.

• The government said that AIG executives would be replaced and the $85 billion bridge loan would be repaid by selling off assets.

• The government stake was implemented to prevent existing shareholders from benefiting from the bailout.

  http://www.ft.com/cms/s/0/271257f2-83f1-11dd-bf00-000077b07658.html

• Trading is suspended on the Russian stock exchanges Micex and RTS.

• This comes after a 20% drop in response to the crisis in the US.

• In an effort to stabilize, the Russian central bank injected $14.16 billion in emergency one-day funds into the money market.

  http://www.ft.com/cms/s/0/6ff9306c-83f1-11dd-bf00-000077b07658,dwp_uuid=9170c6b8-7fde-11dd-8eeb-000077b07658.html

September 17, 2008:

• A money market fund managed by Reserve Management Corporation (RMC) has “broken the buck” as its net asset value (NAV) drops below $1 per share.

• This is the first time since 1994 that this has happened to a money market fund.

• The cause was RMC’s decision to write $785 million held in Lehman Brothers debt down to zero and a large increase in redemptions.

• The NAV finished the day at 97 cents.

  http://www.ft.com/cms/s/0/8bcf03ac-84e1-11dd-b148-0000779fd18c.html

• The Financial Services Authority and UK government waive competition rules and spearhead a merger between Lloyds TSP and HBOS.

• Lloyds will takeover HBOS for £12 billion.

• HBOS was the UK’s largest savings institution.

• The government plans to legislate to give the ministers the ability to block any competition inquiry if a merger is deemed to be vital to maintaining financial stability.

• The merged bank will have around 28% of the mortgage loan market and 50% of the savings market.

  http://www.ft.com/cms/s/0/d7fa43e0-8496-11dd-b148-0000779fd18c.html

September 18, 2008:

• Putnam closes a $12 billion money market fund because of increased redemption requests.

• The net asset value of the fund was $1 per share when it was closed.

  http://www.ft.com/cms/s/0/55a8e210-85aa-11dd-a1ac-0000779fd18c.html

• Central banks from around the world announce $180 billion emergency injection to provide liquidity and halt the escalating crisis.

• This was in response to the lack of lending between banks that had occurred in the US and UK following the AIG bailout.

  http://www.ft.com/cms/s/0/e91b24b6-8557-11dd-a1ac-0000779fd18c.html

September 19, 2008:

• The Russian stock market gains 30% after having trading suspended for two days.

• This was in response to a government pledge of more than $100 billion in liquidity to help the credit squeeze. :

• Standard & Poor’s downgraded Russia’s outlook from positive to stable.

  http://www.ft.com/cms/s/0/6fadc7ae-8634-11dd-959e-0000779fd18c,dwp_uuid=9170c6b8-7fde-11dd-8eeb-000077b07658.html

• The Financial Services Authority approves ban on the short-selling of financial stocks in the UK.

• The ban will remain in effect until January 16, 2009.

• Short-selling has been blamed for driving down the price on financial shares, contributing to the recent failures.

  http://www.ft.com/cms/s/0/3652c4d8-85e3-11dd-a1ac-0000779fd18c.html

• The US Treasury announces it will insure money market funds in an attempt to prevent a run on the funds.

• US President, George W. Bush, approved use of up to $50 billion from the Exchange Stabilization Fund to insure the holdings of any publicly offered money market mutual fund.

• Money market funds hold more than $3,400 billion in investor funds.

  http://www.treas.gov/press/releases/hp1147.htm

  http://www.ft.com/cms/s/0/f770b066-8643-11dd-959e-0000779fd18c.html

• The SEC issues a ban on the short-selling of 799 financial stocks.

• The ban is expected to last for 10 days but could last up to 30.

  http://online.wsj.com/article/SB122181688114256411.html

• Henry Paulson urges Congress to pass legislation that will allow the government to buy toxic mortgage securities from the banks.

• The proposal will give the Treasury authority to purchase up to $700 billion of the troubled assets by issuing Treasury securities.

• The chairman of the Treasury, Mr. Paulson, will have the discretion to determine the timing and scale of the purchases.

  http://www.ustreas.gov/press/releases/hp1149.htm

  http://www.ustreas.gov/press/releases/hp1150.htm

September 21, 2008:

• The Russian finance ministry announces it will provide $24.21 billion in additional funds to the banking system in the form of three-month bonds.

• The finance ministry also increased the number of banks with access to budget funding from three to twenty-eight.

  http://www.ft.com/cms/s/0/195487e8-881f-11dd-b114-0000779fd18c,dwp_uuid=9170c6b8-7fde-11dd-8eeb-000077b07658.html

September 22, 2008:

• Australia, Taiwan, and the Netherlands announce short-sale ban.

• Australia banned short sales on all stock where Taiwan limited the ban to specific circumstances.

  http://online.wsj.com/article/SB122202740902360795.html

• Goldman Sachs and Morgan Stanley are approved by the Federal Reserve to become bank holding companies which subjects them to regulation by the Fed.

• As the last two large standalone investment banks, this move leaves only small boutique securities firms.

• The two banks will now be able to take deposits from savers and will be subject to the Fed’s capital requirements.

  http://www.ft.com/cms/s/0/97a410b6-884a-11dd-b114-0000779fd18c.html

September 23, 2008:

• The state of New York says that it will bring parts of the credit derivative market under the control and regulation of its insurance supervisors.

• New York regulators blame the $62,000 billion credit derivative market for being a major contributor to the credit crisis.

• The new state regulations will take effect on January 1, 2009.

  http://www.nytimes.com/2008/09/23/business/23swap.html?ref=business

September 24, 2008:

• Goldman Sachs announces it will receive a $5 billion capital infusion from Warren Buffett’s company Berkshire Hathaway.

• Goldman will also raise an additional $2.5 billion from the public by selling common shares.

• Buffett’s investment will likely be viewed as a vote of confidence in Goldman by one of the most well-known and successful investors in the US.

  http://online.wsj.com/article/SB122220798359168765.html

• Presidential candidate John McCain announces he will suspend campaigning to return to Washington to focus on the financial crisis.

• McCain also called for a postponement of the debate between him and Barack Obama scheduled for Friday if no resolution had been reached by then.

  http://www.ft.com/cms/s/0/b7b24f2c-8a88-11dd-a76a-0000779fd18c.html

• Rumors about financial trouble of the Bank of East Asia (BEA) cause a bank run in Hong Kong.

• BEA chairman and CEO, David Li, says that the rumors are untrue and BEA has sufficient liquidity.

  http://www.ft.com/cms/s/0/92281bda-8a3b-11dd-a76a-0000779fd18c.html

September 25, 2008:

• President George W. Bush calls an emergency public address to plead to the US public to support the $700 bailout plan.

• Bush warns that the US is facing a serious financial crisis and the US risks a long and painful recession if Congress fails to pass the bailout plan.

  http://www.ft.com/cms/s/0/07448d80-8aab-11dd-a76a-0000779fd18c.html

September 26, 2008:

• US regulators seize the assets of Washington Mutual (WaMu), the sixth largest US bank.

• WaMu shares had lost a quarter of their value in the day before the regulators stepped in.

• WaMu had tried to auction itself to potential buyers but found little interest because of the large exposure to the US mortgage market and likelihood of further future writedowns.

• This is the biggest bank failure in US history.

  http://www.ft.com/cms/s/0/954fb51e-8b64-11dd-b634-0000779fd18c.html

• JP Morgan acquires WaMu’s bank deposits, assets, and the troubled mortgage portfolio from the federal government.

• JP Morgan paid the Federal Deposit Insurance Corporation (FDIC) $1.9 billion for WaMu’s assets making it the largest US depository institution.

  http://www.ft.com/cms/s/0/f652afe0-8bf2-11dd-8a4c-0000779fd18c.html

• The UK government nationalizes Bradford & Bingley (B&B) after retail savers withdraw tens of millions of pounds in recent days.

• The Financial Services Authority said that B&B no longer met threshold conditions for operating as a deposit taker.

• Spanish bank, Santander, agreed to buy B&B’s £21 billion deposit book and branch network for around £600 million.

  http://www.ft.com/cms/s/0/1e5b888c-8c06-11dd-8a4c-0000779fd18c.html

September 28, 2008:

• Washington Mutual Inc. files for Chapter 11 bankruptcy.

• The filing lists more than $8 billion in total debts.

• This is the holding company that was left over after regulators seized Washington Mutual’s banking operations.

  http://seattletimes.nwsource.com/html/businesstechnology/2008210121_wamufiling28.html

• Top policymakers and bankers meet in Tianjin, China at the World Economic Forum.

• The decision-makers agreed that more governmental regulation of financial markets is necessary in the wake of the credit crisis.

• Some of the issues discussed were a need for international accounting standards, policing of the credit default swap market, and greater international cooperation between regulators.

  http://www.ft.com/cms/s/0/537372a4-8d88-11dd-83d5-0000779fd18c.html

September 29, 2008:

• The US House of Representatives votes against the $700 billion bailout bill proposed by the Treasury.

• In response, the S&P 500 fell 8.8%—its worse drop since 1987 and the Dow Jones Industrial Average fell 778 points—its worse points decline ever.

  http://www.ft.com/cms/s/0/483ad64a-8e53-11dd-9b46-0000779fd18c.html

• Citigroup agrees to buy the banking operations of Wachovia, the sixth largest lender in the US for $2.2 billion.

• The takeover will turn Citi into the largest retail bank in the US with more than $600 billion in deposits and more than 4,300 branches.

• The bailout was engineered by the FDIC who will provide a cap on losses of Wachovia’s $312 billion mortgage portfolio.

• Under the agreement, Citi will be responsible for the first $42 billion in losses with the FDIC covering any additional losses.

• In return for the cap on losses, the FDIC will receive a $12 billion stake in Citi in the form of warrants and preferred shares.

  http://www.ft.com/cms/s/0/fcbcfd24-8e25-11dd-8089-0000779fd18c.html

• Central banks pump more cash into the beleaguered credit markets.

• The Fed more than doubled its swap lines with the European Central Bank and other central banks from $290 billion to $620 billion.

  http://www.ft.com/cms/s/0/f9525dd4-8d24-11dd-83d5-0000779fd18c.html

• The European Central Bank along with the governments of the Netherlands, Belgium, and Luxemburg agree to nationalize Fortis, the European banking and insurance giant.

• The three countries will put €11.2 billion into Fortis to save the bank.

• Each government will take a 49% share of Fortis in their countries.

  http://news.bbc.co.uk/2/hi/business/7641132.stm

• One of Germany’s biggest lenders, Hypo Real Estate (HRE), had to be rescued by the German government and other banks after a €50 billion liquidity crisis.

• HRE was given a €35 billion lifeline by German private sector banks, the Bundesbank, and the European Central Bank.

• HRE is also selling off €15 billion of assets to help cover the liquidity shortfall.

  http://www.ft.com/cms/s/0/60cec9cc-8df0-11dd-8089-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• The government of Iceland takes control of Glitnir, the country’s third largest bank.

• The government injected €600 million of equity into the bank.

• Regulators blame the credit squeeze and Glitnir’s inability to obtain short-term financing.

• David Oddsson, central bank governor, said that without intervention, Glitnir would have ceased to exist in the next couple of weeks.

  http://www.ft.com/cms/s/0/e096162e-8e18-11dd-8089-0000779fd18c.html

• Mitsubishi UFJ invests $9 billion in Morgan Stanley in exchange for a 21% share of the company.

• The deal consists of 10% of Morgan Stanley’s common stock and $6 billion in preferred stock.

  http://www.cbsnews.com/stories/2008/09/29/ap/business/main4485753.shtml

• Neuberger Berman is sold to Bain Capital and Hellman & Friedman for $2.15 billion.

• Neuberger is the asset management arm of Lehman Brothers Holdings.

• Just a month before Lehman Brothers collapsed, Carlyle was prepared to pay $7 billion for Neuberger and also let Lehman Brothers retain the right to buy the asset back.

• Financial Times reports that an earlier deal to sell Neuberger could have helped Lehman avoid collapse.

  http://www.ft.com/cms/s/0/f17b35ce-8e4e-11dd-9b46-0000779fd18c.html

September 30, 2008:

• Ireland guarantees deposits of six of the largest Irish banks.

• Ireland guarantees deposits of six of the largest Irish banks.

• The plan guarantees around €400 billion of liabilities in addition to the individual depositor’s €100,000 already covered under the existing deposit scheme.

• The six banks covered were: Allied Irish Banks, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society, and Educational Building Society.

  http://www.ft.com/cms/s/0/2124f8f4-8eb9-11dd-946c-0000779fd18c.html

• Dexia, a Franco-Belgian bank specializing in local authority finance, gets a €6.4 billion capital injection from various European governments.

• The lifeline includes €3 billion from Belgium and Belgian stakeholders, €3 billion from the French government and state controlled bank Caisse des Depots, and €376 million from the Luxembourg government.

• The governments claimed that Dexia would have failed without the bailout and caused unacceptable systematic risk to their financial system.

  http://www.ft.com/cms/s/0/116457fe-8ebc-11dd-946c-0000779fd18c,dwp_uuid=9c837fea-0087-11dd-a0c5-000077b07658.html

• The Securities and Exchange Commission (SEC) issues a clarification on fair value accounting.

• The mark-to-market rule has been blamed by many to have exacerbated the credit crisis by forcing banks write down their assets.

• The clarification says that fair value assumes a orderly transaction between market participants and distressed or forced liquidation sales are not orderly.

  http://www.sec.gov/news/press/2008/2008-234.htm

October 1, 2008:

• The collapse of Sigma Finance marks the end of the era of structured investment vehicles (SIV).

• Sigma was the last surviving SIV, a debt fund that would borrow short-term commercial paper and lend long at a higher interest rate.

• SIVs were crippled when the credit crunch prevented financing of the long-term debt.

• Sigma managed $27 billion and was the oldest and last surviving member of the SIV industry that once controlled over $400 billion.

• The decision to liquidate was made after JP Morgan cut Sigma’s last funding line.

  http://www.ft.com/cms/s/0/18fbcd5c-8fe4-11dd-9890-0000779fd18c.html

• The European Commission proposes a revision to the Capital Requirements Directive which controls the capital requirements of banks operating within the European Union.

• The new rules are designed to reinforce the stability of the financial system, reduce risk exposure, and improve the supervision of banks that operate in more than one European Union country.

  http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/1433&format=HTML&aged=0&language=EN&guiLanguage=fr

  http://ec.europa.eu/internal_market/bank/docs/regcapital/crd_proposal_en.pdf

• MBIA, a monoline insurance company, files a lawsuit against Countrywide Financial claiming the mortgage lender fraudulently induced MBIA to guarantee billions of dollars in Countrywide mortgage bonds.

• MBIA filed the suit in New York’s Supreme Court and claims the bad loans have cost it more than $459 million in payouts on the insurance contracts.

• Countrywide Financial was acquired by Bank of America earlier this year.

  http://www.ft.com/cms/s/0/2fa80d88-900a-11dd-9890-0000779fd18c.html

October 2, 2008:

• General Electric announces plans to raise $15 billion in capital from a sale of common stock.

• $3 billion will come from Warren Buffett’s Berkshire Hathaway along with $3 billion more in warrants that expire in five years.

  http://www.ft.com/cms/s/0/68209e54-901a-11dd-9890-0000779fd18c.html

• Wachovia terminates a $9.3 billion short-term fund that held money for colleges and other non-profit institutions.

• The colleges may not have access to their investments for years putting pressure on payroll and other bills.

  http://online.wsj.com/article/SB122290590988096397.html

October 3, 2008:

• The revised bailout plan passes through the US House of Representatives and is signed into law by President Bush.

• The bill gives the Treasury Department the power to purchase $700 billion in toxic debt on banks’ balance sheets.

• Changes in the bill from Monday’s failure to pass included an increase in the FDIC insurance on bank deposits.

  http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf

  http://money.cnn.com/2008/10/03/news/economy/house_friday_bailout/index.htm?postversion=2008100309

• California governor, Arnold Swarzenegger, tells federal government that California may need to borrow $7 billion in an emergency loan because of the tightening of the credit markets.

• The loan would be used to pay for public services such as law enforcement, hospitals, and firefighters until tax revenue arrives in April.

• Mr. Swarzenegger said the state will need the money by the end of October but may not be able to secure a loan by then.

  http://www.ft.com/cms/s/0/38105032-9165-11dd-b5cd-0000779fd18c.html

October 4, 2008:

• Wells Fargo announces it will pay $15.1 billion in an all-share offer to purchase Wachovia.

• This is a significantly better deal than the $2.2 billion government engineered deal with Citigroup.

• The proposed sale does not involve government assistance but Citigroup plans to file for an injunction to prevent the deal or substantial damages from Wells Fargo.

  http://www.ft.com/cms/s/0/da6d694a-91ac-11dd-b5cd-0000779fd18c.html

October 5, 2008:

• Germany announces it will guarantee all privately-held German bank accounts.

• All the accounts are currently worth €568 billion.

• The move is aimed at preventing panic withdrawals in Europe’s largest economy.

• Germany’s current scheme protects only the first €20,000 per account.

  http://www.ft.com/cms/s/0/d895ef54-92ef-11dd-98b5-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

October 6, 2008:

• French President, Nicolas Sarkozy, hosts an emergency summit on the global financial crisis in Paris.

• Leaders of France, Germany, UK, and Italy meet and agreed that Europe will not allow any bank to fail and file for bankruptcy.

• Sarkozy said that the European Union will stand behind their banking and financial institutions.

• Measures to protect banks could include liquidity from the central banks, targeted measures for individual banks or a reinforcement of bank deposit guarantees.

• Sarkozy holds the rotating presidency of the European Union.

  http://www.forbes.com/feeds/ap/2008/10/06/ap5513800.html

  http://online.wsj.com/article/SB122313566316305169.html?mod=googlenews_wsj

• 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.

• BofA 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.

• BofA said that around 400,000 borrowers will be helped by the deal.

  http://www.ft.com/cms/s/0/a15e7646-93ee-11dd-b277-0000779fd18c.html

• 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.ft.com/cms/s/0/f4e2f0e6-93c9-11dd-9a63-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• Iceland 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.ft.com/cms/s/0/07113e40-938d-11dd-9a63-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• 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.ft.com/cms/s/0/a979d518-9390-11dd-9a63-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html

• The Federal Reserve holds talks with dealers, investors, and exchange executives in hope of speeding up the process of creating a central clearing house for credit default swaps (CDS).

• The CDS on Freddie Mac and Fannie Mae debt were recently cleared for around 95 cents on the dollar.

• Estimates of the value of CDS on Lehman Brothers debt are around $400 billion, which are expected to be cleared for 10 cents on the dollar costing banks up to $360 billion.

  http://www.ft.com/cms/s/0/c1be9880-9407-11dd-b277-0000779fd18c.html

October 7, 2008:

• The Dow Jones Industrial Average falls below 10,000 for the first time since 2004.

• Despite the Fed’s attempt to inject liquidity in the market, investors sell-off because of fears of a recession and uncertainty around the credit crisis.

  http://www.ft.com/cms/s/0/c7a1612e-9407-11dd-b277-0000779fd18c.html

• Bank of America (BofA) 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 $10 billion in capital.

  http://www.ft.com/cms/s/0/50592a82-93fa-11dd-b277-0000779fd18c.html

• The Internal Revenue Service 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://online.wsj.com/article/SB122333518536309433.html

• Iceland nationalizes the second largest bank in the country, Landsbanki.

• The Icelandic Financial Supervisory Authority dismissed the bank’s management and appoints a receivership.

  http://www.ft.com/cms/s/0/34681bc8-944d-11dd-953e-000077b07658.html

• Iceland turns to Russia for a €4 billion loan to help stabilize its financial situation.

• The loan, if finalized, could almost double Iceland’s foreign currency reserves.

• Prime minister, Geir Haarde, said the loan will be used to help support the krona which plummeted against the euro earlier in the week.

  http://www.ft.com/cms/s/0/41392f38-9450-11dd-953e-000077b07658,dwp_uuid=a36d4c40-fb42-11dc-8c3e-000077b07658.html

• The Fed announces plans to set up a special purpose vehicle to buy unlimited amounts of three-month commercial paper from banks and non-financial companies.

• The Fed said this move was necessary because companies were struggling to issue commercial paper for any period longer than overnight.

  http://www.ft.com/cms/s/0/f797a084-9473-11dd-953e-000077b07658.html

    :

• Spain announces the formation of a €30-50 billion emergency fund to provide liquidity by buying Spanish bank assets.

• Along with the fund, prime minister Jose Luis Rodriguez Zapatero announced the Spanish government will increase its guarantees for bank deposits from €20,000 to €100,000.

• Mr. Zapatero said the fund will provide credit and liquidity by buying healthy assets, not toxic ones.

  http://www.ft.com/cms/s/0/8e37974e-9495-11dd-953e-000077b07658.html

• Russia injects $37 billion in long-term subordinated loans into state- controlled banks.

• The government will provide liquidity in the Russian market by using Russia’s two largest state banks, VTB and Sberbank.

• Investors hope the long term liquidity will unfreeze the money markets in Russia.

  http://www.ft.com/cms/s/0/32ca8f78-9464-11dd-953e-000077b07658.html

October 8, 2008:

• Six central banks coordinate efforts and cut interest rate in an attempt to stem the economic damage from the financial shock of the credit crisis.

• The central banks involved in the cut were UK, Canada, Sweden, Switzerland, US Fed, and the European Central Bank.

• The half-point rate cut was the first time the ECB has worked together with the Fed since September 11, 2001.

  http://online.wsj.com/article/SB122346445779914857.html

• Jefferson County, Alabama joins California and Massachusetts in petitioning Treasury officials for federal financial help.

• Alabama governor, Bob Riley, asked federal officials to support a $2.7 billion refinancing bailout. :

• If the county was forced into bankruptcy, it could be the largest bankruptcy ever in the US municipal bond market.

• Municipal markets rely on financial guarantees from banks and insurance companies which have been difficult to obtain during the credit crunch.

  http://www.ft.com/cms/s/0/6d8334e8-94d3-11dd-953e-000077b07658.html

• The UK government launches a £400 billion rescue plan to help restore confidence in the financial markets.

• The three-pronged plan included: 1) the government investing as much as £50 billion in the banking industry, 2) guaranteeing as much as £250 billion of new bank debt, and 3) adding £100 billion to the existing Bank of England short-term loan scheme.

  http://www.ft.com/cms/s/0/b7da5246-9574-11dd-aedd-000077b07658.html

• The UK government declares it will sue Iceland to recover all UK customer deposits in Icesave.

• Reykjavik reversed its pledge to compensate depositors in the failed internet bank that was nationalized.

• Icesave has about 300,000 UK customers that prime minister Gordon Brown said will be fully reimbursed for their loss.

• £50,000 is the legal ceiling for compensation claims but UK chancellor, Alistar Darling decided this was an exceptional circumstance and the UK government will back any additional amounts.

  http://www.ft.com/cms/s/0/44a180c4-9524-11dd-aedd-000077b07658.html

• Iceland’s largest bank, Kaupthing, receives a SK5 billion loan from Sweden’s central bank.

• The loan was given to Kaupthing’s Swedish division to avert significant liquidity problems putting Swedish deposits in jeopardy.

  http://www.ft.com/cms/s/0/33d5b2f2-9514-11dd-aedd-000077b07658.html

October 10, 2008:

• Japanese company Yamato Life files for bankruptcy becoming what is viewed as the first direct casualty in Japan from the fallout of the US subprime mortgage crisis.

• Yamato Life had $2.7 billion in liabilities at the time of the filing.

• Japanese government officials tried to downplay the bankruptcy as a special case based on Yamato’s unique business model but some analysts believed it to be a foreshadowing of things to come in Japan as the credit crisis begins to affect the country.

  http://www.ft.com/cms/s/0/5e003a08-967b-11dd-9dce-000077b07658.html

October 11, 2008:

• 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.

  http://online.wsj.com/article/SB122368071064524779.html

• 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.

  http://www.ft.com/cms/s/0/22655888-972b-11dd-8cc4-000077b07658.html

October 13, 2008:

• European Union leaders meet in Paris to coordinate efforts to combat Europe’s credit crisis.

• Many of the EU members currently using the euro adopted agreed upon measures at the meeting while the rest of the 27 member EU will have a chance to adopt the measures at a meeting later in the week.

• The four main parts of the agreement included: 1) Making it easier for banks to obtain new capital by guaranteeing the banks’ issuance of new medium-term debt; 2) Reducing distressed banks through recapitalization and other appropriate means; 3) a pledge to support banks by the government buying preferred shares; and 4) Urging regulators to relax mark-to-market accounting rules that require securities to be valued at their current price.

• The EU plan follows many of the same measures included in last week’s bailout announcements by both the United States and the United Kingdom.

• This meeting between the heads of the 15 countries who have adopted the euro signified the first formal meeting since the launch of the currency back in 1999.

  http://www.actionforex.com/latest-news/european-economy/eu-leaders-reach-agreement-to-combat-financial-crisis-(update)-2008101264004/

  http://www.ft.com/cms/s/0/286c70a2-993a-11dd-9d48-000077b07658.html

• French president, Nicolas Sarkozy, pledges €360 billion in liquidity to French banks.

• The plan will include €320 billion in guarantees for new bank debt and a €40 billion fund for recapitalizing lenders.

• In return for the bailout, the French government will demand conditions on the banks such as changes to pay and bonus structures.

  http://www.ft.com/cms/s/0/146274aa-996f-11dd-9d48-000077b07658.html

• The prime minister of Spain, Jose Luis Rodriguez Zapatero, announces that Spain will provide up to €100 billion of guarantees for new debt issued by commercial banks in 2008.

• This plan followed a meeting at the eurozone summit over the weekend to try to develop a coordinated effort to combat the credit crisis.

  http://www.ft.com/cms/s/0/1d1019e0-991f-11dd-9d48-000077b07658.html

• The UK government starts the nationalization process by injecting £37 billion in the nation’s three largest banks. :

• The UK government will end up owning a majority share in the Royal Bank of Scotland (RBS) and over a 40% share in Lloyds and HBOS.

• In return for the bailout, the banks have agreed to cancel dividend payments until the loans are repaid, have board members appointed by the Treasury, and limit executive pay.

  http://www.ft.com/cms/s/0/83bc2cea-98ef-11dd-9d48-000077b07658.html

• The European Central Bank attempts to revive credit market by weekly injections of unlimited euro funds at an interest rate of 3.75%.

• The ECB president, Jean-Claude Trichet, was also contemplating relaxing the collateral standards to make the funds more accessible to banks.

• In a coordinated move with the U.S. Federal Reserve, the ECB, the Bank of England and Swiss National Bank also announce they would provide unlimited liquidity at a pre-fixed interest rate into the market for dollars over periods of seven days, a month, and 84 days.

  http://www.ft.com/cms/s/0/6fcc5ed0-9903-11dd-9d48-000077b07658.html

• Following its European partners, Italy pledges to intervene as necessary to prevent any bank failures in its country.

• Finance minister, Giulio Tremonti, said Italy will guarantee new bank bonds of up to 5 years until the end of 2009 and the Bank of Italy will provide €40 billion in treasury bills to banks to refinance inferior assets that can not be currently used as collateral.

  http://www.ft.com/cms/s/0/1c802092-993d-11dd-9d48-000077b07658.html

    :

• In coordination with other eurozone countries, the Dutch government announces it will guarantee interbank lending up to €200 billion.

• This follows the set up of a €20 billion Dutch fund to help recapitalize banks and insurers.

  http://www.ft.com/cms/s/0/acbf267e-9949-11dd-9d48-000077b07658.html

• Germany approves a plan to inject €500 billion into credit markets.

• The plan gives finance minister, Peer Steinbrück, access to a €100 billion stabilization fund and the authority to guarantee up to €400 billion in bank debt.

• Concessions by banks who tap into this fund include a €500,000 limit on executive pay, a ban on bonuses, and a ban on dividend payments.

  http://www.ft.com/cms/s/0/56894d2c-9938-11dd-9d48-000077b07658.html

October 14, 2008:

• 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.

• The plan also included allowing the FDIC to temporarily guarantee the senior debt of all FDIC-insured institutions and increasing access to funding for businesses by announcing further details of the commercial paper funding facility.

  http://www.ft.com/cms/s/0/395a0fa6-99f2-11dd-960e-000077b07658.html

  http://www.ft.com/cms/s/0/20a79422-99ef-11dd-960e-000077b07658.html

• United Arab Emirates’ (UAE) ministry of finance added a $19 billion liquidity injection to domestic banks bringing the total dollars injected to $32.7 billion.

• The UAE central bank offered 13.6 billion in liquidity to help domestic banks in September.

• To protect local deposits, the UAE government guaranteed all deposits and interbank lending.

  http://finance.indiainfo.com/2008/10/14/0810141327_uae_injects_further_19_bn_into_countrys_banking_sector.html

• Japan announces a plan that will help steady the Japanese market and avoid the worse of the credit crisis.

• Among the measures included are lifting restrictions on companies buying back their shares, strengthening disclosure on short selling, and the temporary suspension of the sale of government-owned stocks.

  http://www.ft.com/cms/s/0/3505b08e-999a-11dd-9d48-000077b07658.html

• The Australian government unveils a $10.4 billion stimulus package.

• The Economic Security Strategy is designed to help pensioners, low and middle income families, and first time home buyers withstand the credit crisis and global economic slowdown.

• This followed the Australian government announcing that it would guarantee all bank deposits for three years, guarantee all term wholesaling funding by Australian banks in international markets and double its planned purchase of residential mortgage backed securities.

  http://www.ft.com/cms/s/0/07e76430-9995-11dd-9d48-000077b07658.html

• The Icelandic stock exchange begins trading again after a three day shutdown.

• The opening did not include Iceland’s three largest banks which were nationalized last week.

  http://www.ft.com/cms/s/0/a2e44924-99dd-11dd-960e-000077b07658.html

October 15, 2008:

• Greece announces a €28 billion package to support the banking sector and sustain economic growth.

• Finance minister, George Alogoskoufis, said that Greek banks were in a healthy position but measures needed to be taken to keep their costs of funding in line with other European banks.

• The package includes guarantees for up to €15 billion of medium-term lending and €8 billion of special government bond issues.

  http://www.ft.com/cms/s/0/a4570824-9acc-11dd-a653-000077b07658.html

October 16, 2008:

• Citigroup announces a third quarter loss of $2.8 billion after receiving a $25 billion injection from the US government.

• CFO, Gary Crittenden, says that the harsh climate in the banking industry may lead to opportunistic acquisitions for Citigroup.

• Mr. Crittenden stated that Citi may use the $25 billion injection to focus on its five core businesses instead of funding an acquisition.

  http://www.ft.com/cms/s/0/d0c71ef8-9b76-11dd-ae76-000077b07658.html

• Switzerland agrees to fund a vehicle designed to hold up to $60 billion of toxic debt held by UBS.

• The government also injects €3.9 billion to help recapitalize UBS.

• The Swiss government denied this plan as being a rescue because UBS did not face collapse but rather has a credibility problem.

• The plan will result in almost 10% of UBS being government owned.

• Credit Suisse declined government assistance and instead turned to private equity to raise SFr10 billion, making it the best capitalized financial institution in Europe.

• The private investors included Qatar’s sovereign wealth fund, the Olayan family of Saudi Arabia, and Koor Industries of Israel.

  http://www.ft.com/cms/s/0/98fd7346-9be4-11dd-ae76-000077b07658.html

October 17, 2008:

• The European Union 27 leaders sign off on a joint $2.7 trillion bank bailout plan after a 2-day summit in Brussels.

• Other ideas explored at the summit included new international supervisory boards for at least 30 of the world’s largest banks, a bloc wide stimulus package, and implementing a plan to battle climate change.

• The EU leaders also agreed to use a meeting this weekend with President Bush to discuss proposals on shaping international financial rules.

  http://online.wsj.com/article/SB122416613194540553.html

• South Korea announces plans to raise spending and cut taxes in order to stabilize its economy.

• This was in response to devastating falls in both the won and the Seoul stock market.

• More details about a rescue package are expected to be unveiled on Sunday.

• Singapore and Malaysia both announce blanket guarantees on bank deposits until December 2010.

  http://www.ft.com/cms/s/0/bf1e4a0c-9c73-11dd-a42e-000077b07658.html

October 19, 2008:

• The South Korean government announces a $130 billion rescue package for its banks and companies to help withstand the credit crisis.

• Seoul also joined Hong Kong and Australia in guaranteeing bank debts.

• South Korea will offer guarantees for three years.

• The government will inject $750 million into the Industrial Bank of Korea to help enhance its capital base.

• South Korean banks are seen as the most vulnerable in Asia due to their dependence on foreign funding.

  http://www.ft.com/cms/s/0/5befbd26-9e03-11dd-bdde-000077b07658.html

• The Dutch government injects €10 billion into banking and insurance group ING.

• The form of the package will allow the government to purchase preferred shares that will count towards ING’s Tier 1 capital but will not have voting rights or dilute ordinary shareholders.

• In return for the injection, ING dropped its dividend, cut all executive board bonuses, and gave the government 2 of the 12 seats on the supervisory board.

  http://www.ft.com/cms/s/0/43307256-9e05-11dd-bdde-000077b07658.html

October 20, 2008:

• Germany eases the conditions imposed on banks wishing to enroll in the €500 billion rescue package passed last week.

• The enactment of the decree was meant to encourage the banks that needed credit guarantees but did not capital to participate.

• Banks that want a credit guarantee only will have to submit their business model for approval.

• The €500 billion fund is up and running but the decree also set a €10 billion limit that may be injected into a single bank along with a €5 billion maximum value of assets per bank.

  http://www.ft.com/cms/s/0/1a6b3ecc-9e9c-11dd-98bd-000077b07658.html

• Pakistan discusses a $10-15 billion international support package with the International Monetary Fund.

• The package will be designed to help Pakistan stabilize its economy and avoid a balance of payments crisis.

• Although the talks have not resulted in a formal request, a little over half of the funding would come from the IMF with the balance provided by the World Bank, the Asian Development Bank, and bilateral donors including Saudi Arabia.

  http://www.ft.com/cms/s/0/474bc524-9ed3-11dd-98bd-000077b07658.html

• Iceland seeks $6 billion rescue package from the International Monetary Fund to help stabilize its economy.

• The talks are likely to end up with the IMF contributing just over $1 billion with the remaining balance supplied by central banks in the Nordic region and Japan. Russia could also participate.

• The negotiations have not resulted in a formal request from the IMF yet but people close to the situation say that the IMF’s involvement is a prerequisite for the central banks and Japan.

• The talks have focused on three areas of Iceland’s economy; the banking sector, fiscal policy and monetary policy, and the exchange rate.

  http://www.ft.com/cms/s/0/7b83b114-9e9f-11dd-98bd-000077b07658.html

• The French government announces it will inject €10.5 billion into France’s six largest banks.

• The effort is aimed at stabilizing the banks’ balance sheets to ensure they will continue to provide credit to consumers and businesses.

• This plan was in response to the reluctance of the French banks to take advantage of the €40 billion recapitalization fund set up by the French government earlier in the week.

• The six banks included Credit Agricole, BNP Paribas, Societe Generale, Credit Mutuel, Caisse d’Epargne, and Banque Populaire.

  http://www.ft.com/cms/s/0/7fbcf47e-9f09-11dd-98bd-000077b07658.html

• Sweden announces a $205 billion program to stabilize its financial system and boost liquidity.

• Along with the rescue package, Sweden will set up a $2 billion fund that can be used to buy stakes in any bank that requires capital.

• Any bank that receives a capital injection will have to agree to limit salaries and bonus payments to managers.

• The government said that no banks have experienced capital problems so far but they are worried about their exposure to Baltic states that will likely have a sharp economic downturn.

  http://search.ft.com/search?queryText=sweden+launches&aje=true&dse=&dsz=

October 21, 2008:

• The US Federal Reserve announces 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.

  http://www.federalreserve.gov/newsevents/press/monetary/20081021a.htm

  http://www.ft.com/cms/s/0/4da5eebc-9f83-11dd-a3fa-000077b07658.html

• UK announces plans for a £3 billion loan to the government of Iceland.

• The loan proceeds will be used to help British savers who lost their deposits in Icesave after being nationalized by the Icelandic government.

• The loan will hopefully help unfreeze the assets of over 300,000 British savers who had deposits with Icesave.

• The loan will also help relieve tensions between the UK and Iceland after Iceland nationalized its banking sector, freezing the assets of many British savers.

  http://www.ft.com/cms/s/0/108635c0-9fbd-11dd-a3fa-000077b07658.html

• South Korea announces plans to spend $3.8 billion to buy land and houses from cash strapped developers.

• The governmental efforts are designed to prevent the construction industry from collapsing and taking the 20% share of the economy with it.

  http://www.ft.com/cms/s/0/940ae466-9f8d-11dd-a3fa-000077b07658.html

• Moody’s cuts the rating of ING Groep, the largest Dutch financial services company.

• The credit rating on ING’s senior debt was lowered to Aa3 to reflect the lower profitability of the bank.

  http://www.bloomberg.com/apps/news?pid=20601085&sid=ahxDDlKUJLis&refer=europe

October 22, 2008:

• The White House announces it will hold a G-20 meeting on November 15, 2008.

• The global financial summit is expected to focus on the credit crisis and steps that can be taken to improve the world economy.

  http://www.ft.com/cms/s/0/2b1a9e52-a04a-11dd-80a0-000077b07658.html

• Wachovia announces third quarter losses of $23.9 billion.

• They also announced details of the run on the bank before its sale to Wells Fargo. The run included depositor’s withdrawal of more than $26 billion or 24% of their deposits.

• The loss was the most that any bank has impaired since the beginning of the credit crisis.

  http://www.ft.com/cms/s/0/6a21e164-a045-11dd-80a0-000077b07658,dwp_uuid=ffa475a0-f3ff-11dc-aaad-0000779fd2ac.html

• Italy attempts to protect local small businesses with aid package.

• The Foreign Trade Institute will provide €100 million and the private sector will provide €30 million in an effort to make Italian businesses more competitive in the world marketplace and ease the pressure of the financial crisis.

  http://www.ft.com/cms/s/0/84279a5a-a012-11dd-80a0-000077b07658.html

• The California Public Employees’ Retirement System (Calpers), the largest public pension fund in the US, says it will increase its contribution rate from employers to cover losses incurred on its investments.

• Calpers said that its funds have fell more than 20% or at least $48 billion from the end of June until October 10, 2008.

• This is an effort by Calpers to keep delivering its promise to supply the pension benefits to the 1.6 million beneficiaries.

  http://online.wsj.com/article/SB122469119659558689.html

October 24, 2008:

• AIG has borrowed a total of $90.3 billion of the $123 billion rescue fund set up by the government.

• The money has been used to pay off bad debts incurred by AIG’s practice of guaranteeing other firm’s risky mortgage investments (called credit default swaps).

• The new CEO of AIG warned that the $123 billion lifeline provided by the government may not be enough to keep AIG afloat.

  http://www.washingtonpost.com/wp-dyn/content/article/2008/10/23/AR2008102303352.html

October 26, 2008:

• The International Monetary Fund announces a proposed loan to Ukraine of $16.5 billion.

• The loan, once approved by the IMF’s executive board, will help to stabilize Ukraine’s banking system and currency both of which have been damaged by the global credit crisis.

• The loan will likely be a standby arrangement for two years and will only be approved if Ukraine’s parliament agrees to approve legislation aimed at propping up confidence and liquidity.

  http://www.ft.com/cms/s/0/11b42960-a39c-11dd-942c-000077b07658.html

• Kuwait guarantees all local bank deposits and suspends trading in Gulf Bank, the nation’s second largest bank.

• The move was made after some clients dealing in derivatives refused to honor their commitments.

• A senior banker estimated the losses to be around $800 million but Gulf Bank did not reveal the extent of the losses.

• This was the first action of this type taken against a Middle Eastern bank.

• Kuwait also announced it would set up a task force to deal with the implications of the global credit crisis.

  http://www.ft.com/cms/s/0/79fb64a4-a35e-11dd-942c-000077b07658.html

October 27, 2008:

• The Bank of Korea cut interest rates by 75 basis points and said it would buy up to $7 billion of bank bonds to provide more liquidity to the banking sector.

• To prop up the Won, the central bank will allow exporters to borrow dollars to pay for foreign exchange losses and small companies to roll over foreign-currency debt for one year.

• These measures were taken after an emergency monetary meeting over the weekend where President Lee Myung-bak called for strong action to help South Korea withstand the global credit crisis.

  http://www.ft.com/cms/s/0/de68c258-a3c5-11dd-942c-000077b07658.html

• Belgium announces a €3.5 billion capital injection into KBC.

• Despite assurances that KBC’s capital base was solid; its share price plummeted on Friday.

• The structure of the injection was similar to the ING injection—dividends will not be paid this year, no executive bonuses, and the state will nominate two directors for KBC’s board.

  http://www.ft.com/cms/s/0/afaf0986-a410-11dd-8104-000077b07658.html

October 28, 2008:

• The Bank of England says that the world’s financial firms have now lost $2.8 trillion as a result of the global credit crisis.

• Bank governor, Mervyn King, said that the British banking system had been closer to collapsing earlier this month than at any time since World War I. :

• UK Prime Minister, Gordon Brown, called on the IMF to be able to offer more than the $250 billion it has now to help struggling nations.

  http://news.bbc.co.uk/2/hi/business/7694275.stm

• The Dutch give Aegon a €3 billion capital injection.

• Aegon, the Dutch insurance company, has seen its shares decline 75% of their value over the past year.

• In return for the injection, Aegon will slash its dividend, the board will give up all bonuses, and the government will appoint two supervisory board members—identical to the terms agreed to by ING and KBC.

  http://www.ft.com/cms/s/0/918f17cc-a4c2-11dd-b4f5-000077b07658.html

• The chairman of Gulf Bank resigns over derivative losses in Kuwait’s second largest bank.

• Fitch rating agency downgraded the bank and Moody’s warned that it might downgrade the bank after the derivate losses, a run on the bank, and lack of risk management.

• After Kuwait’s government suspended trading on Gulf Bank’s stock on Friday, depositors showed up to withdraw their money Monday morning.

• The run on the bank was considered modest and was the first known bank run in the Middle East.

  http://www.ft.com/cms/s/0/63831a34-a55a-11dd-b4f5-000077b07658.html

• Hungary will get a $25.1 billion rescue package to help bolster confidence in its economy that has been devastated by the global credit crisis.

• The IMF will provide $15.7 billion, the European Union $8.1 billion, and $1.3 billion from the World Bank.

• This will be the largest international rescue package for one country and the first for an EU member country since the crisis began. :

• Hungary has been hard hit by the global credit crisis because of its dependence on foreign financing.

  http://www.ft.com/cms/s/0/1026656e-a553-11dd-b4f5-000077b07658.html

• The US Federal Reserve announces a temporary reciprocal currency arrangement with the Reserve Bank of New Zealand.

• The swap agreement will help ease pressures in the US dollar short-term funding markets.

  http://www.federalreserve.gov/newsevents/press/monetary/20081028a.htm

October 29, 2008:

• The Fed, the Banco Central do Brazil, the Banco de Mexico, the Bank of Korea, and the Monetary Authority of Singapore announce a temporary swap line between the banks.

• The agreement is meant to improve liquidity and help the countries that are sound and well managed obtain US dollar funding.

  http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm

• Kuwait’s parliament votes to guarantee all bank deposits of all local and foreign banks operating in the emirate.

• This move will guarantee around $86 billion of deposits which is designed to instill confidence in Kuwait’s banking system after the central bank had to rescue the country’s second largest bank earlier this week.

  http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aw1ZBVd5IIFA

• Hypo Real Estate (HRE) becomes the first private sector group to tap into Germany’s €500 billion bailout fund.

• HRE, a commercial property lender, requested €15 billion to help with short-term liquidity issues.

  http://www.ft.com/cms/s/0/489034b4-a59b-11dd-9d26-000077b07658.html

October 31, 2008:

• Citigroup announces a $1.4 billion loss on securitized credit card loans in the third quarter compared to a $169 million gain in the third quarter of last year.

• Citigroup said that global credit card revenue has declined 40%.

• This may be the beginning of the second stage of the global financial crisis, instead of subprime mortgages, credit card lenders are expected to suffer high losses as rising unemployment and financial hardship make iit difficult for borrowers to pay their bills.

• Credit card loans have been largely securitized in the same way that mortgages have been.

  http://www.reuters.com/article/businessNews/idUSTRE4A005E20081101?feedType=RSS&feedName=businessNews

November 1, 2008:

• J.P. Morgan Chase announces a plan to restructure $70 billion in mortgages for borrowers who are behind on their payments or soon could be.

• The plan will affect around 400,000 borrowers.

• The new terms will include loans that carry lower interest rates, smaller principal amounts, or other more affordable terms.

  http://online.wsj.com/article/SB122549543952589677.html

November 3, 2008:

• South Korea announces plans to pump an extra $11 billion into their economy next year.

• The stimulus package is designed to help South Korea withstand the global financial crisis, which is starting to affect the price of exports.

• Kang Man-soo, the finance minister, said that economic growth could fall to the lowest level in a decade in the wake of the global credit crisis.

• Much of the money is expected to go to help the real estate and construction industries, along with the smaller firms that make up 90% of the workforce.

  http://www.ft.com/cms/s/0/1e9d78ee-a977-11dd-958b-000077b07658.html?nclick_check=1

• HBOS, the UK’s largest mortgage lender, reveals writedowns of £5.18 billion for the nine months to the end of September.

• The loss included a £457 million on HBOS’s exposure to Lehman Brothers and Washington Mutual.

• The bank said raising £11.5 billion will increase its capital position and help the group withstand the global credit crisis.

  http://www.ft.com/cms/s/0/286e797a-a988-11dd-958b-000077b07658.html

November 4, 2008:

• The European Union finance ministers approve a set of proposals designed to strengthen the world’s financial system.

• The proposal contained ideas that will be brought up by the EU at the G-20 meeting on November 15.

• The five ideas included: 1) supervisory colleges for all cross-border financial companies, 2) strengthened risk control mechanisms in financial institutions, 3) codes of conduct on excessive risk-taking, 4) tighter rules for credit rating agencies, and 5) harmonized definitions of banks’ capital to permit comparisons.

  http://www.ft.com/cms/s/0/bdb0196c-aadc-11dd-897c-000077b07658.html

• Two of Brazil’s largest banks agree to merge a week after assuring investors that they would survive the global credit crisis.

• Brazil’s second largest non-state bank, Itaú Holding Financeira SA, will purchase its smaller rival, Unibanco, creating Latin America’s largest bank.

• Latin America’s banks, once thought to be immune to the credit crisis because of their low exposure to subprime mortgage securities, have been hurt by the possibility of default on their loans and sharp currency declines.

• Finance minister, Guido Mantega, said the increased concentration will help strengthen the local financial system.

  http://online.wsj.com/article/SB122575870912295311.html

• Swiss Re, one of the world’s largest reinsurers, announces a $263 million loss.

• This announcement surprised analysts who were expecting a profit.

• Swiss Re had a writedowns of 289 million Swiss francs on its credit default swap portfolio during the quarter.

  http://news.bbc.co.uk/2/hi/business/7707888.stm

November 5, 2008:

• Barack Obama wins the US presidential election.

• Obama will be inaugurated on January 20, 2009.

• Exit polls show that around 60% of the voters put the economy as their top concern.

  http://www.ft.com/cms/s/0/0e59f430-ab61-11dd-b9e1-000077b07658,dwp_uuid=729ab242-9cb1-11db-8ec6-0000779e2340.html

• The US Treasury plans to sell $55 billion in bonds to help finance its bank rescue program.

• In its $25 billion auction next week, the Treasury will offer a new type of bond, coined “bail-out” bond, which will reach maturity in three years, paying a fixed rate of interest every six months.

• The US Treasury expects to earn up to $550 billion by the end of 2008.

  http://news.bbc.co.uk/2/hi/business/7711533.stm

  http://www.savingsbonds.gov/instit/annceresult/press/preanre/2008/A_20081105_2.pdf

• Bond insurers MBIA and Ambac announce higher losses than analysts predicted.

• The losses, $806.5 million for MBIA and $2.43 billion for Ambac, are likely to produce scrutiny by the credit rating agencies leading to another possible downgrade in credit ratings.

• There is still doubt on whether bond insurers will be able to participate in the government’s $700 billion TARP (Troubled Asset Relief Program) but CEO of Ambac, David Wallis, believes they should because the industry is important to the stability of the financial system.

  http://www.bloomberg.com/apps/news?pid=20601009&sid=a6WUFxdnm.pU

November 9, 2008:

• AIG receives a revised $150 billion government bailout plan that will reduce interest payments and give it more time to sell assets.

• The plan increases the total package given to AIG from $123 billion to $150 billion.

• Details of the new deal include 1) a swap of the original $85 billion two-year loan to a new $60 billion five-year loan, 2) an interest rate reduction of 8.5% over LIBOR to 3% over LIBOR, 3) a purchase of $40 billion in preferred shares that will carry a 10% annual interest rate, 4) a creation of a new vehicle that will purchase some of AIG credit default swaps from counterparties, and 5) formation of a second vehicle that will purchase AIG’s mortgage backed securities.

  http://www.ft.com/cms/s/0/614586b4-ae9f-11dd-b621-000077b07658.html

November 10, 2008:

• The global credit crisis caused Fitch rating agency to downgrade the emerging markets of Bulgaria, Hungary, Kazakhstan, and Romania.

• Fitch also revised the long-term foreign currency rating of South Korea, Mexico, Russia, and South Africa from stable to negative.

• Fitch reported that eastern European countries were the most exposed to the global credit crisis because of their large current account deficits and external financing needs.

  http://www.ft.com/cms/s/0/68d76a82-af1c-11dd-a4bf-000077b07658.html

November 11, 2008:

• American Express converts to a bank holding company.

• The move will give American Express permanent access to the low-cost Federal Reserve funds.

• In return, American Express will have to submit to stricter regulation and more stringent capital requirements.

• With only $7.2 billion in retail deposits out of $127 billion total assets, American Express may be the first in a trend of bank holding applications accepted from companies with little retail banking presence.

  http://www.ft.com/cms/s/0/2805855a-af91-11dd-a4bf-000077b07658.html

November 12, 2008:

• 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. :

• Paulson stated the Treasury was evaluating a program that would provide a match of public funds to any funds the financial institutions were able to raise from private investors.

  http://www.ustreas.gov/press/releases/hp1265.htm

  http://www.ft.com/cms/s/0/6cdb3ee0-b0ef-11dd-8915-0000779fd18c.html

November 14, 2008:

• Standard & Poor’s rating agency downgrades Turkey’s sovereign credit outlook from stable to negative because of its external financing needs.

• S&P said ratings could stabilize if the Turkish government took actions that ease external financing conditions by tightening policies or securing creditor support.

• Turkey has been reluctant to go to the IMF for help but outside observers believe this may be inevitable.

  http://www.ft.com/cms/s/0/26c93e4a-b24b-11dd-bbc9-0000779fd18c.html

• German chancellor, Angela Merkel, announced proposals to be brought up at the G-20 meeting.

• The findings of a government-commissioned expert panel suggested 1) a world risk map of global financial institutions that would help to quickly identify future trouble spots, 2) the creation of a central body to oversee credit rating agencies, 3) an international register of major loans, and 4) better alignment of managers’ pay to discourage short-term risk taking.

  http://www.ft.com/cms/s/0/97c3f92e-b245-11dd-bbc9-0000779fd18c.html

• Freddie Mac asks the US government for access to a $13.8 billion lifeline after reporting a quarterly loss of $25.3 billion.

• The lifeline will come from the $200 billion facility promised when the government nationalized Freddie Mac and Fannie Mae.

• Fannie Mae reported a $29 billion quarterly loss and said it might need more than $100 billion to stay in business.

  http://www.ft.com/cms/s/0/0d5576c0-b28e-11dd-bbc9-0000779fd18c.html

November 15, 2008:

• 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; 1) strengthening transparency and accountability, 2) improving regulation, 3) promoting market integrity, 4) reinforcing cooperation, and 5) reforming international institutions.

• The group listed immediate and medium tern action plans for each of the five principles.

  http://online.wsj.com/article/SB122677642316131071.html

  http://online.wsj.com/article/SB122675491756631041.html?mod=djemalertNEWS

November 17, 2008:

• 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.

• The Treasury also stressed that the deadline for private banks to apply for help from the fund is December 8, 2008. Private banks were unable to apply for the funds previously because the bailout included stock purchases.

  http://money.cnn.com/2008/11/17/news/companies/tarp_banks/index.htm?source=yahoo_quote

November 24, 2008:

• The US government agrees to rescue Citigroup after an attack by investors caused the stock price to plummet 60% over the last week.

• Under the plan, Citigroup will absorb the first $29 billion of a pool of $306 billion identified toxic assets held by the bank.

• The remaining losses, if they occur, will be covered by three government agencies; the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation.

• In exchange for the insurance, Citigroup will give the government warrants to buy shares.

• In addition, the government will inject another $20 billion of capital into Citigroup bringing the total infusion to $45 billion.

  http://s.wsj.net/article/SB122747680752551447.html

November 25, 2008:

• 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 Ginnie Mae, and the Federal Home Loan Banks.

• The other $200 billion will be used to fund the term asset-backed securities loan facility (Talf) which will lend money to holders of AAA-rated securities that are backed by student loans, auto loans, credit card loans, and small business loans.

• The Treasury will provide $20 billion from the $700 billion troubled asset relief program (Tarp) to provide credit protection in connection with Talf.

• The announcement caused interest rates on mortgage-backed securities to fall to their lowest levels since January.

  http://www.ft.com/cms/s/0/e7411216-bafb-11dd-bc6c-0000779fd18c.html

November 28, 2008:

• 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.

  http://www.bis.org/publ/bcbs145.pdf?noframes=1

November 30, 2008:

• The World Bank launches a Debt Management Facility (DMF) to help developing countries prevent debt problems in the future.

• The DMF will focus on helping low income countries achieve debt stability.

• The governments of Austria, Belgium, Canada, The Netherlands, Norway, and Switzerland have made initial commitments of $12 million to the facility.

  http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21993683~pagePK:34370~piPK:34424~theSitePK:4607,00.html

December 9, 2008:

• The rating agency Standard and Poor’s (S&P) downgrades Russia to BBB.

• Russia is the first G8 country to be downgraded since the beginning of the credit crisis.

• S&P downgraded Russia’s credit rating because it expects the Russian economic output to decline. The downgrade is also a response to the depletion of Russia’s foreign exchange reserves and possible difficulties Russia will have in “meeting external financing needs.”

  http://www.ft.com/cms/s/0/a35ce7ea-c592-11dd-b516-000077b07658.html

• Landsbanki, the bank nationalized by the government of Iceland, files for Chapter 15 bankruptcy in the U.S.

• The filing while prevent U.S. creditors from initiating lawsuits while the bank reorganizes.

  http://www.bloomberg.com/apps/news?pid=20601085&sid=ahoHJ8w4ZnME&refer=europe

December 11, 2008:

• The Bank of Korea cuts interest rates to 3%. This reduction is twice greater than expected.

• Korea may be hurt significantly by the global financial crisis because of its high levels of foreign debt.

  http://news.bbc.co.uk/2/hi/business/7776804.stm

December 16, 2008:

• Goldman Sachs reports a fourth-quarter loss of $2.12 billion.

• This was the first quarterly loss posted by Goldman since it became a publicly traded company in 1999.

• The loss was blamed on declining asset values, including real estate holdings.

  http://www.ft.com/cms/s/0/404664ca-cb77-11dd-ba02-000077b07658.html

December 17, 2008:

• In a surprising move, the Federal Reserve (the Fed) lowers interest rates to a range of 0-0.25%.

• The drop was larger than most analysts expected.

• With the interest rate at near 0%, the Fed loses one of its most powerful tools in combating a recession.

  http://www.ft.com/cms/s/0/9ecbf5fc-cbd9-11dd-ba02-000077b07658.html

December 18, 2008:

• Norges Bank―Norway’s central bank―cuts Norway’s interest rate to 3%.

• Norway’s economy has slowed significantly as the end of the housing boom coincided with the global financial crisis and a drop in oil prices.

  http://www.ft.com/cms/s/0/42c45446-cc8f-11dd-acbd-000077b07658.html

December 19, 2008:

• President George W. Bush announces plans to lend General Motors and Chrysler $17.4 billion to prevent their collapse.

• The White House stated that failure of the Detroit Three (GM, Chrysler, and Ford) could result in 1.1 million workers losing their jobs and more than a 1% cut in real gross domestic product (GDP) growth.

• $13.4 billion will come from the Troubled Asset Relief Program (TARP) and the loans will come with tough restructuring plans aimed to prevent future trouble.

  http://www.ft.com/cms/s/0/c201c044-cdda-11dd-8b30-000077b07658,dwp_uuid=a491f060-b57f-11dd-ab71-0000779fd18c.html

• South Korea announces it will form a $15 billion fund next month to increase the capital ratios of its banks to encourage lending.

• Korean banks will be able to access the fund through selling preferred shares, hybrid bonds, and subordinated bonds to the fund.

• Fund participation will be voluntary, and will aim to persuade Korean banks to lend money to businesses that have been affected by the lack of available credit.

  http://www.ft.com/cms/s/0/9018ff6e-cd6e-11dd-9905-000077b07658.html

• Accusations surface by Fortis minority shareholders that Yves Leterme, the Belgium prime minister, along with other government officials, tried to influence the decision of the courts in the sale of Fortis.

• Belgium’s branch of Fortis was nationalized by the government back in September and parts of the bank’s assets were to be sold to BNP Paribas.

• The appeals court concluded that that minority shareholders should have been consulted about the plan to sell the company.

  http://www.ft.com/cms/s/0/8047b878-cd6e-11dd-9905-000077b07658.html

• The International Monetary Fund (IMF) outlines a plan to loan $2.4 billion to Latvia.

• The loan will be set up as a standby arrangement to help stabilize Latvia’s financial sector and restore depositor confidence.

  http://www.imf.org/external/pubs/ft/survey/so/2008/CAR121908A.htm

• The Bank of Japan (BoJ) cuts its interest rate to 0.1%.

• The BoJ also said it would start buying commercial paper in an attempt to ease the corporate credit crunch.

  http://www.ft.com/cms/s/0/6acbcbbc-cd8a-11dd-8b30-000077b07658.html

December 20, 2008:

• S&P downgrades the credit rating of eleven of the world’s largest banks, which signals that the global financial crisis could last longer than expected.

• The downgrade included the following prominent banks in the U.S. and Europe: JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Morgan Stanley, Goldman Sachs, Barclays, Credit Suisse, Deutsche Bank, Royal Bank of Scotland, and UBS.

  http://www.ft.com/cms/s/0/8b20cc34-ce37-11dd-8b30-000077b07658.html

December 22, 2008:

• In a move to protect its domestic car industry, Russia raises car import duties by 50%.

• Motorists in 30 cities across the country protested in response.

  http://www.ft.com/cms/s/0/dc1b5534-cfca-11dd-abf9-000077b07658.html

• $3,280 billion of mergers and acquisitions (M&A) activity took place worldwide in 2008. This represents a decrease of 29% in M&A activity from 2007. :

• Companies abandoned 1,309 deals because of financing difficulties, volatility in valuations, and widespread risk aversion.

  http://www.ft.com/cms/s/0/d322de98-d056-11dd-ae00-000077b07658.html

• The People’s Bank of China (BoC) cuts interest rates to 5.31%, the fifth cut in the last three months.

• The People’s BoC also reduced the capital reserve requirement by 50 basis points in an effort to restore China’s high growth rate.

• Forecasters put China’s GDP growth rate at 5%, down from the 11.9% of 2007.

  http://www.ft.com/cms/s/0/c501b5ae-d034-11dd-ae00-000077b07658.html

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

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