The US & Global Financial Crisis – A Timeline of What Happened
Here are some of the most important milestones in the unraveling of the world’s financial systems:
A Timeline of Events: 2007 | 2008 | 2009 | 2010
The Financial Crisis in 2007
April 2: Sub-prime mortgage lender New Century Financial files for bankruptcy. This will have a knock-on effect on banks around the world that have bought repackaged mortgages.
July 17: Investment Bank Bear Stearns informs investors in two of its hedge funds that their investments are virtually worthless following catastrophic losses in May and June.
July 19: Federal Reserve chairman Ben Bernanke warns that the US sub-prime mortgage crisis could end up costing up to $100m.
August 9: French investment bank BNP Paribas tells clients they cannot withdraw money from two funds because of problems valuing their assets due to a “complete evaporation of liquidity” in the market. This is the starkest indication yet of the lack of trust between banks.
August 9: The European Central Bank, the Fed, the Bank of Japan and the Bank of Canada start adding funds to the markets in an effort to raise liquidity.
17 August: The Fed cuts the Fed Funds rate by 50 basis points to 5.75%, and warns the credit crunch could hamper economic expansion.
September 4: Inter-bank lending rates are the highest since December 1998. Libor rises to 6.7975%, far above the Bank of England’s 5.75% base rate. This shows a lack of trust among banks.
September 13: British bank and popular mortgage lender Northern Rock receives emergency funds from the Bank of England. The next day, depositors storm its branches and withdraw GBP 1bn, plus a further GBP 1bn over the coming days.
September 18: The Fed Funds rate is cut again by 50 basis points to 4.75%.
October 1: Leading Swiss bank UBS announces a quarterly loss of $3.4bn stemming from exposure to the US sub-prime mortgage market.
October 1: US banking giant Citigroup reveals a $3.1bn quarterly loss related to sub-prime mortgage investments. Two weeks later, Citigroup writes down another $5.9bn, and within six months its losses will have reached $40bn.
December 6: President Bush announces a scheme to freeze interest rates on sub-prime mortgages to help ailing homeowners.
December 13: For the first time ever, five central banks around the world launch a concerted action to offer loans to banks. As a result, inter-bank interest rates ease temporarily.
December 19: Worries about the financial health of several insurers that provide coverage for bond issuers prompts Standard and Poor’s to downgrade its investment-grade ratings for these firms.
A Timeline of Events: 2007 | 2008 | 2009 | 2010