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 

January 9: The World Bank forecasts that the global economy will grow more slowly in 2008 owing to the financial crisis in developed countries.

January 21: Stock markets around the world suffer the steepest falls since September 11, 2001.

January 22: The Fed makes an emergency rate cut of 75 basis points to 3.5%. Stock markets recover the previous day’s losses.

January 31: Bond insurer MBIA reports a $2.3bn quarterly loss stemming from its exposure to sub-prime mortgage products.

February 17: Private-sector attempts to rescue Britain’s Northern Rock fail and the bank is taken over by the government.

March 17: JP Morgan Chase offers to buy Bear Stearns for just $236m or $2 a share. The price is revised to $10 a share ($1.1bn) a week later after shareholders protest. As part of the deal, JP Morgan Chase also receives a $29bn loan from the Federal Reserve.

April 8: The IMF warns that losses from the credit crisis could amount to $1 trillion as the contagion spreads to the consumer credit, corporate debt and commercial real estate markets.

July 12: The crude oil price reaches an all-time high of $147.27 a barrel.

July 14: The two leading U.S. mortgage lenders and guarantors Fannie Mae and Freddie Mac – which together hold almost half of all U.S. home loans – receive financial assistance from the government after a run on their shares.

September 5: U.S. unemployment figures show 6.1% of workers without a job in August, up from 5.7% in July. This is a clear indication that corporations are reducing their business activity.

September 7: Fannie Mae and Freddie Mac are taken over by the government to avert a potential financial meltdown. 

September 15: Lehman Brothers fails to find a buyer and files for Chapter 11 bankruptcy. The government takes no action, letting the firm go under.

September 15: Merrill Lynch is acquired by Bank of America for $50bn.

September 16: Felled by massive underwriting payouts it has to make when mortgage-holders default, insurance colossus AIG receives an $85bn rescue package from the Federal Reserve in return for an 80% equity stake. AIG will later get additional funding, to total $182.5bn by mid-2009.

September 25: Major mortgage lender Washington Mutual (WaMu) is closed down and sold to JP Morgan Chase.

September 28: European banking and insurance giant Fortis is partly taken over by the European Central Bank and the governments of the Netherlands, Belgium and Luxembourg.

September 29: The House of Representatives rejects a $700bn rescue plan for the U.S. banking sector. Stock markets plunge around the world as panic about a prolonged economic crisis takes hold.

October 1: A revamped $700bn rescue package for the financial industry is passed by the Senate.

October 3: The House of Representatives approves the $700bn bail-out plan, clearing the way for it to be signed into law.

October 8: The British government unveils a GBP 50bn rescue package for the banks, plus GBP 200bn in loan financing.

October 8: The Fed, ECB, Bank of England and the central banks of Canada, Switzerland and Sweden each makes an emergency rate cut of 50 basis points. Base lending rates now stand at 1.5% in the United States, 4.5% in Britain and 3.75% in the Eurozone.

October 11: The G7 nations meet in Washington and release a plan of ‘decisive action’ to restore liquidity to the credit markets.

October 14: The U.S. government announces a $250bn plan to buy stakes in several banks in order to restore trust in the industry.

October 15: September retail sales post a 1.2% fall, confirming concerns that the entire U.S. economy is being affected by the credit crisis. Stock markets plummet in response to the news.

October 30: Figures released show that the U.S. economy shrank by 0.3% in the third quarter of 2008. The Fed Funds rate is cut from 1.5% to 1%. The Bank of England chops a massive 150 basis points off its key rate, to 3%. The ECB cuts 50 basis points, to 3.25%.

November 12: The Treasury cancels plans to use part of the $700bn TARP bail-out package to buy up bad bank debt, saying the money will go into the consumer credit market.

November 14: The Eurozone is now officially in recession, after figures show its collective GDP contracting by 0.2% in the third quarter.

November 14: G20 leaders meet in Washington to talk about how to stop the global financial crisis from getting any worse.

November 20: Iceland receives a $2.1bn loan from the IMF following the collapse of its banking industry in October. This makes it the first Western nation to get an IMF loan since 1976.

November 23: Citigroup is given $20bn in emergency funds after its stock price drops over 60% in a week.

November 25: The Fed announces plans to put a further $800bn into the economy to facilitate lending and stabilize the financial system.

November 26: The European Commission announces a EUR 200bn economic recovery package to salvage millions of jobs by increasing confidence among consumers and encouraging them to spend.

December 1: The United States is officially in recession, after the National Bureau of Economic Research finds that the economy has been shrinking since December 2007.

December 11: The ECB, Bank of England and the central banks of Sweden and Denmark cut their rates again.

December 16: U.S. interest rates are the lowest ever after the Fed Funds rate is cut from 1% to a range of zero to 0.25%. 

December 19: President Bush announces that up to $17.4bn of the $700bn TARP bank rescue funds could go to the Big Three auto manufacturers – General Motors, Ford and Chrysler. 

December 29: A $6bn rescue package for GMAC, General Motors’ automobile loan company, is announced.