101 Events That Rocked The World - A Timeline Of Significant Market Events
2008 changed the global economic landscape. Unexpected events
occurring in compressed time destabilized many Wall Street
institutions. On Main Street, jobs were lost and small businesses
stalled. And across the globe, stock markets retrenched as
increasingly interconnected economies braced for a deep recession.
As we reflect today on what the future holds, it is instructive to
also reflect on the events that brought us to where we are now. The
following is a summary of 101 critical market events that have
defined the crisis thus far and supplements our prior timeline
(located at
http://www.mofo.com/docs/pdf/081118CrisisTimeline.pdf). The arc
of these events clearly demonstrates how quickly, widely and deeply
the credit contagion spread.
2007 – The Clouds Gather
January 5 Ownit Mortgage Solutions, a
California based subprime lender, filed for bankruptcy.
February 5 Mortgage Lenders Network USA,
another subprime lender in California, filed for bankruptcy.
Mortgage Lenders was the fifteenth largest subprime lender.
February 8 HSBC announced it would increase
its reserves for loan losses because of its exposure to U.S.
mortgages.
February 13 ResMae Mortgage, a large U.S.
subprime lender, filed for bankruptcy.
March 4 HSBC announced write downs of $11
billion from U.S. mortgages, marking the beginning of a parade of
write downs linked to the valuation of mortgages.
March 20 People's Choice Home Loan,
another California subprime lender, filed for bankruptcy.
April 3 New Century Financial, another
California subprime lender, declared bankruptcy. New Century was
the second largest U.S. subprime lender.
April 12 SouthStar, another subprime lender,
filed for bankruptcy.
June 23 Bear Stearns bailed out one of its
hedge funds by pledging $3.2 billion in loans, marking the largest
bailout of a hedge fund since Long Term Capital Management in 1998.
The hedge fund ran into trouble because of exposure to U.S.
subprime mortgages.
July 16 Alliance Bancorp declared bankruptcy.
Alliance Bancorp specialized in Alt-A mortgages.
July 31 Two Bear Stearns hedge funds filed for
bankruptcy.
August 6 American Home Mortgage, reported at
one time to be the tenth largest retail mortgage lender in the
U.S., filed for bankruptcy, adding concern that the credit crisis
had hit non-subprime borrowers.
August 10 Homebanc, another mortgage lender,
filed for bankruptcy.
August 14 Goldman Sachs and investors injected
$3 billion in the firm's Global Equity Opportunities Fund,
about $2 billion of which was provided by Goldman.
August 17 The Fed cut the discount rate by 25
basis points to 5.75% from 6.00%. The discount rate is the rate at
which the Fed lends to commercial banks and other depositary
institutions for short periods of time in order to provide
short-term liquidity.
September 14 The Bank of England extended
emergency funding to Northern Rock, a large U.K. mortgage lender.
The mortgage crisis had crossed the borders of the United
States.
September 18 The Fed cut the discount rate and
the federal funds rate by 50 basis points to 5.25% and 4.75%,
respectively. The federal funds rate is the interest rate at which
depository institutions lend balances at the Fed to other
depository institutions overnight.
October 1 UBS announced write downs of $3.4
billion.
October 15 Citigroup announced write downs of
$5.9 billion.
October 24 Merrill announced a loss from its
loan portfolio (primarily CDOs) of $7.9 billion.
October 31 Deutsche Bank announced write downs
of $3 billion.
October 31 The Fed cut the discount rate and
the federal funds rate each by 25 basis points to 5.00% and 4.50%,
respectively.
November 1 Credit Suisse announced write downs
of $1 billion.
November 7 Morgan Stanley announced write
downs of $3.7 billion.
November 9 Wachovia announced write downs of
$1.1 billion.
November 13 Bank of America announced write
downs of $3 billion.
November 27 Citigroup raised capital by
issuing mandatory convertible securities to Abu Dhabi Investment
Authority. The securities had a yield of 11%.
December 5 Fannie Mae announced it would raise
$7 billion in capital and reduce dividends paid to its
shareholders.
December 6 The Paulson-Jackson plan was
announced, which froze mortgage rates on subprime adjustable rate
mortgages for a period of five years for eligible participants. To
be eligible, in general, the subprime adjustable rate mortgage must
have been originated between January 2005 and July 2007, and the
interest rate must be reset at a higher rate. The plan was limited
to owner occupied properties. In addition, in general, the borrower
must be current in payments, must prove that he/she cannot afford a
higher payment, and must have some equity in the home.
December 10 UBS announced write downs of an
additional $10 billion.
December 11 The Fed cut the discount rate and
the federal funds rate by 25 basis points to 4.75% and 4.25%,
respectively.
December 20 Congress enacted the Debt Relief
Act of 2007, designed to provide relief to borrowers in foreclosure
by excluding mortgage debt forgiven by a lender from gross income.
2008 – The Perfect Storm
January 11 Bank of America announced it would
acquire Countrywide, the largest U.S. mortgage lender, for $4
billion. Countrywide was on the verge of bankruptcy.
January 15 Citigroup announced a loss of $9.8
billion and write downs of $18 billion.
January 17 Merrill announced a loss of $7.8
billion and write downs of $14.1 billion.
January 22 The Fed cut the discount rate and
the federal funds rate each by an unexpected 75 basis points to
4.00% and 3.50%, respectively.
January 24 A $150 billion U.S. economic
stimulus plan was unveiled in which eligible taxpayers would
receive tax refunds ranging from $300 to $1,200, subject to a
phase-out for high-income earners.
January 30 The Fed cut the discount rate and
the federal funds rate by an additional 50 basis points to 3.50%
and 3.00%, respectively.
February 12 Auctions of auction rate
securities, reported to be a $330...
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