ABOUT THE AUTHOR

Donald R. Van Deventer, Ph.d.

Don founded Kamakura Corporation in April 1990 and currently serves as its chairman and chief executive officer where he focuses on enterprise wide risk management and modern credit risk technology. His primary financial consulting and research interests involve the practical application of leading edge financial theory to solve critical financial risk management problems. Don was elected to the 50 member RISK Magazine Hall of Fame in 2002 for his work at Kamakura.

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A Credit Crisis Chronology, Part 1 Through February 2008 – This Time Isn’t Different

05/13/2011 02:36 AM

As the credit crisis recedes into history, leaving only U.S. government deficits behind, it is important to record the credit crisis history before it’s lost.  This blog summarizes the events that Kamakura’s risk professionals judged to be important milestones as the United States was consumed by the credit crisis.  Today’s blog is part one of the credit crisis chronology, ending in February, 2008, just prior to the collapse of Bear Stearns.

The credit crisis chronology below was assembled from many sources:

  1. A contemporaneous set of press clippings and news articles maintained by Kamakura Corporation from the very early dates of the credit crisis
  2. A credit risk chronology maintained by the Federal Reserve Bank of St. Louis
  3. A credit risk chronology maintained by the University of Iowa.  We would like to thank @bionicturtle via twitter for bringing this chronology to our attention
  4. The “Levin report,” released by Senator Carl Levin on April 13, 2011.

The full citation for the Levin report is as follows:

Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, Majority and Minority Staff Report, Permanent Subcommittee on Investigations, United States Senate, April 13, 2011.

The full text is available here:
http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf

The Federal Reserve Bank of St. Louis time line is available at this web page:
http://timeline.stlouisfed.org/index.cfm?p=timeline

The University of Iowa Credit Crisis Chronology is particularly useful as it contains full web page references to the original source of the information. That chronology is available at this site:
http://www.uiowa.edu/ifdebook/timeline/Financial_Crisis_Timeline.pdf

The consolidated chronology through February 2008 starts on September 2, 2004:

September 2, 2004
Washington Mutual chief risk officer Jim Vanasek
sends internal Washington Mutual memo stating
“At this point in the mortgage cycle with prices
having increased far beyond the rate of increase
in personal incomes, there clearly comes a time
when prices must slow down or perhaps even
decline.” (Source: Levin report, page 66)
2005
Investment banks standardized credit default
swap contracts for RMBS and CDO securities.
(Source: Levin report, page 34)
May 31, 2005
“Fed Debates Pricking the U.S. Housing
Bubble,” New York Times.
(Source: Levin report, page 272).
June 3, 2005
“Yale Professor Predicts Housing Bubble Will
Burst,” National Public Radio.
(Source: Levin report, page 272).
June 16, 2005
“The global housing boom: In come the waves.
The worldwide rise in house prices is the biggest
bubble in history. Prepare for the economic pain
when it pops.” The Economist.
July 4, 2005
“Cover Story: Bubble Bath of Doom (warning
of overheated real estate market),” Washington
Post. (Source: Levin report, page 272).
September 30, 2005
Case-Shiller home price index for Boston, MA
peaks. (Source: Standard & Poor’s)
December 22, 2005
“Housing Affordability Hits 14-Year Low,”
The Wall Street Journal.
(Source: Levin report, page 272).
December 31, 2005
Case-Shiller home price index for Detroit,
Michigan peaks. (Source: Standard & Poor’s)
April, 2006
National Association of Realtors signals
slowing home sales
April 19, 2006
USA Capital files for bankruptcy
(Source: Las Vegas Sun)
April 30, 2006
In an April memo discussing Countrywide’s
issuance of subprime 80/20 loans, which are
loans that have no down payment and are
comprised of a first loan for 80% of the home’s
value and a second loan for the remaining 20%
of value, resulting in a loan to value ratio of 100%,
Countrywide CEO Angelo Mozilo wrote
“In all my years in the business I have never
seen a more toxic pr[o]duct.”
(Source: Levin report, page 232).
May 2, 2006
Ameriquest Mortgage closes retail branch
network and lays off 3,600 employees
(source: Orange County Register)
May 5, 2006
Merit Financial Inc. files for bankruptcy
(Source: SeattlePI)
May 30, 2006
“Foreclosure Rates Rise Across the U.S.,”
National Public Radio.
(Source: Levin report, page 272).
May 31, 2006
Case-Shiller home price index for San Francisco
peaks. (Source: Standard & Poor’s)
May 31, 2006
Case-Shiller home price index for Washington,
DC peaks. (Source: Standard & Poor’s)
May 31, 2006
Case-Shiller home price index for Tampa
peaks. (Source: Standard & Poor’s)
June 30, 2006
Case-Shiller home price index for Phoenix
peaks. (Source: Standard & Poor’s)
June 30, 2006
Case-Shiller home price index for San Diego
peaks. (Source: Standard & Poor’s)
June 30, 2006
Case-Shiller home price index for New York
peaks. (Source: Standard & Poor’s)
June 30, 2006
Case-Shiller home price index for the 10-city
Composite Index peaks. (Source: Standard & Poor’s)
July 20, 2006
“For Sale Signs Multiply Across the U.S.”
The Wall Street Journal.
(Source: Levin report, page 272).
July 31, 2006
Case-Shiller home price index for Cleveland
peaks. (Source: Standard & Poor’s)
July 31, 2006
Case-Shiller home price index for 20-city
Composite Index peaks.
(Source: Standard & Poor’s)
August, 2006
US Home Construction Index is down 40%
on a year over year basis
August, 2006
Internal Washington Mutual presentation on
Option ARM credit risk reported that from 1999
to 2006 Option ARM borrowers selected the
minimum payment more than 95% of the time.
(Source: Levin report, page 59)
August 25, 2006
“Housing Gets Ugly,” New York Times.
(Source: Levin report, page 272).
August 31, 2006
Case-Shiller home price index for Denver
peaks. (Source: Standard & Poor’s)
August 31, 2006
Case-Shiller home price index for Las Vegas
peaks. (Source: Standard & Poor’s)
September, 2006
National Association of Realtors report drop
in existing home sales prices
September 30, 2006
Case-Shiller home price index for Los Angeles
peaks. (Source: Standard & Poor’s)
September 30, 2006
Case-Shiller home price index for Chicago
peaks. (Source: Standard & Poor’s)
September 30, 2006
Case-Shiller home price index for Minneapolis
peaks. (Source: Standard & Poor’s)
September 30, 2006
At the end of September 2006, the head of
Deutsche Bank’ sales force Sean Whelan wrote
that some CDO tranches were getting increasingly
difficult to sell: “[T]he equity and the AAA tranches
were the parts we found difficult to place.”
(Source: Levin report, page 348).
October 31, 2006
Federal banking regulators caution banks to use
fully indexed rate when qualifying borrowers for
a loan, including loans with lower initial teaser
rates. Washington Mutual delays implementation
for six months (Source: Levin report, page 94-5).
October 31, 2006
S&P director notes in an internal e-mail
“note also the ‘mailing in the keys and walking
away’ epidemic has begun.”
(Source: Levin report, page 268).
December, 2006
Sebring Mortgage declares bankruptcy
(Source: Levin report, page 263).
2006
Washington Mutual moves its holding company
subsidiary Long Beach Mortgage Corporation
into its banking subsidiary
(Source: Levin report, page 55).
December 13, 2006
Dan Sparks informed the Firm-Wide Risk
Committee of Goldman Sachs that two more
subprime originators had failed in the last week
and that there was concern about early payment
defaults, saying “Street aggressively putting
back early payment defaults to originators
thereby affecting the originators business.
Rumors around more failures in the market.”
(Source: Levin report, page 478).
December 14, 2006
Goldman Sachs mortgage department loses
money for 10 consecutive days, triggering a
senior management meeting on December 14,
2006. (Source: Levin report, pages 385 and 404).
December 22, 2006
FDIC dedicated examiner at Washington Mutual
Steve Funaro raises questions of senior
management about unexpected increases in
“early payment defaults” and demands from
Wall Street firms doing securitizations to
repurchase the loans. (Source: Levin report, page 82)
December 31, 2006
In 2006, 29.3% of subprime loans had a combined
(first and second mortgage) loan to value ratio
of 100% compared to only 2.6% in 2000.
(Source: Levin report, page 23).
December 31, 2006
Record number of home loan defaults began
in December (Source: Levin report, page 45).
December 31, 2006
Washington Mutual’s high risk loans begin
incurring record rates of delinquency and default
(Source: Levin report, page 48).
December 31, 2006
Case-Shiller home price index for Miami peaks.
(Source: Standard & Poor’s)
January 3, 2007
Ownit Mortgage Solutions Inc. files for Chapter 11
(Source: Levin report, page 47 and 263).
January 29, 2007
Subprime lender Fremont Investment & Loan
announced that it had ‘severed ties’ with 8,000
brokers whose loans had high delinquency rates.
(Source: Levin report, page 365).
January 31, 2007
Wamu chief risk officer Ron Cathcart identifies
5 top priority risk issues “in light of the slowdown
and decline in home prices in some areas.”
(Source: Levin report, page 82).
January 31, 2007
The OTS found that, as of January 31, 2007,
Washington Mutual had $62 billion in outstanding
Option ARMS in its investment portfolio, of
which 80% were negatively amortizing.
(Source: Levin report, page 220).
January 31, 2007
By January 2007, nearly 10% of all subprime
loans were delinquent, a 68% increase from
January 2006. (Source: Levin report, page 268).
February 2, 2007
Dan Sparks reported to senior Goldman Sachs
executives “The team is working on putting loans
in the deals back to the originators
(New Century, Wamu, and Fremont, all real
counterparties) as there seem to be issues
potentially including some fraud at origination…”
(Source: Levin report, page 484).
February 5, 2007
Mortgage Lenders Network USA Inc., the country’s
15th largest subprime lender with $3.3 billion in
loans funded in third quarter 2006, files for Chapter 11 (Source: www.boston.com)
February 7, 2007
New Century, a major subprime lender, disclosed
in a conference call with investors that ‘the level
of early-payment defaults and loan repurchases
[had] led to tighter underwriting guidelines,”
that its non-prime loan production would be
declining, and that it would be restating its
earnings. (Source: Levin report, page 365).
February 7, 2007
HSBC issues warning that results from its
mortgage services operations will be much
worse than current market estimates because
of increased subprime delinquencies and the
inability to refinance because of falling home prices
(Source: HSBC press release, www.hsbc.com)
February 8, 2007
Subprime mortgage index falls 10% since
1/18/2007
February 13, 2007
ResMae declares bankruptcy
(Source: Bloomberg)
February 14, 2007
Dan Sparks of Goldman Sachs noted in a memo,
“Originators are really in a bad spot. Thinly
capitalized, highly levered, dealing with
significant loan put backs, some with retained
credit risk positions, now having trouble selling
loans above par when it cost them 2 points to
produce.” (Source: Levin report, page 479).
February 14, 2007
Wells Fargo lays off 300 subprime staff.
(Source: Levin report, page 479).
February 18, 2007
Wamu chief risk officer for mortgage lending
notes in a memo “There is a meltdown in the
subprime market” and that “many submarkets
within California actually have declining home
prices…” (Source: Levin report, page 128).
February 21, 2007
A report to senior management at Goldman
Sachs stated that spreads on BBB and
BBB- indices had increased more than 100
basis points on the day.
(Source: Levin report, page 415).
February 22, 2007
Wall Street Journal labels the developing
crisis “Subprime Carnage”. The index of credit
default swaps, ABX-HE, linked to BBB- asset-backed
securities falls 5.6% in one day, 24% since
January 18. Spreads widen to over 1000.
Bloomberg reports: “The perceived risk of
owning low- rated subprime mortgage bonds
rose to a record for a fifth day after Moody’s
Investors Service said it may cut the loan
servicing ratings of five lenders”
Bloomberg also reported: “The BBB- rated portions
of ABX contracts are ‘going to zero,’ said Peter
Schiff, president of Euro Pacific Capital, a securities
brokerage in Darien, Connecticut. It’s a self-
perpetuating spiral, where as subprime companies
tighten lending standards they create even more
defaults” by removing demand from the housing
market and hurting home prices”
February 22, 2007
HSBC fires head of its US mortgage lending
business as losses reach $10.5 billion
February 27, 2007
The Federal Home Loan Mortgage Corporation
(Freddie Mac) announces that it will no longer
buy the most risky subprime mortgages and
mortgage-related securities.
(Source: Levin report, page 47).
February 28, 2007
David Beck, Wamu head of Wall Street
securitizations, writes that securitizing second
lien loans is “not a viable exit strategy” and
that a Wamu May 2006 securitization had already
experienced 7% foreclosures.
(Source: Levin report, page 83).
February 28, 2007
By late February 2007, the number of subprime
lenders shuttering their doors had reached 22.
One of the first headlines announcing the
onset of a ‘mortgage crisis’ appeared in the
Daily Telegraph of London.
(Source: Levin report, page 263).
February 28, 2007
During the month of February the ABX Index
fell from a high of 90 early in the month to 69
at the end of the month, indicating a drop of
more than 23% in the value of subprime
RMBS securities. (Source: Levin report, page 365-6).
February 28, 2007
During February 2007, the Goldman Sachs
mortgage department decided to cancel 4
pending CDOs, downsize another 2, and bring
all of its remaining CDOs to market as quickly
as possible. The Mortgage Department limited
its CDO Origination Desk to carrying out only
the CDO transactions already underway.
(Source: Levin report, page 388).
March 7, 2007
FDIC issues cease and desist order against
Fremont Investment & Loan which exposed
the existence of unsafe and unsound subprime
lending practices.
(Source: Levin report, pages 45 and 47).
March 7, 2007
The average early-payment default rate for subprime
loans in Goldman’s inventory had climbed from
1% of aggregate volume to 5%…Dan Sparks
described the firm’s exposure as follows:
“As for the big 3 originators-Accredited, New
Century, and Fremont, our real exposure is in
the form of put-back claims. If we get nothing
back we would lose about $60 million.rumor
today is that the FBI is in Accredited.
(Source: Levin report, page 485).
March 8, 2007
Biggest US house builder DR Horton warns
of huge losses from sub-prime fall-out
March 12, 2007
After completing review of one New Century
loan pool, a Goldman Sachs analyst recommended
“putting back 26% of the pool…if possible.”
(Source: Levin report, page 485). In March,
New Century stopped paying on Goldman
Sachs claims. (Source: Levin report, page 486).
March 14, 2007
“Subprime market-Isolated or Tipping Point?”
article in Bloomberg raises specter of large
losses in subprime mortgage lending
March 16, 2007
Accredited Home Lenders Holding announces
it would sell $2.7bn of its sub-prime loan book
– at a heavy discount – in order to generate
some cash for its business.
March 20, 2007
People’s Choice Home Loan files for Chapter
11 (Source: Bloomberg)
March 31, 2007
$400 million of the Gemstone 7 CDO
structured by Deutsche Bank and HBK, 36%
of the issue, goes unsold.
(Source: Levin report, page 370).
March 31, 2007
Almost two-thirds of the Anderson Mezzanine
2007-1 CDO structured by Goldman Sachs
goes unsold. (Source: Levin report, page 392).
March 31, 2007
In March Goldman Sachs informed its Board
of Directors and the SEC that it had stopped
purchasing subprime loans and RMBS
securities through, in its words, “conservative
bids.” (Source: Levin report, page 409).
March 31, 2007
In March, 2007, in connection with Goldman’s
quarterly earnings call with analysts, “Mortgage
Talking Points” prepared for Goldman CFO
Viniar stated that the Department’s revenues
were primarily the result of its short positions.
(Source: Levin report, page 418).
March 31, 2007
When Goldman Sachs personnel reviewed a
loan pool purchased from Fremont, the results
were even worse than for the New Century
loans. Goldman concluded that “on average,
about 50% of about 200 files look to be
repurchase obligations.” (Source: Levin report,
page 486). The same 50% repurchase rate
was found to apply to loans purchased from
Countrywide as well.
(Source: Levin report, page 487).
April 2, 2007
New Century, subprime lender, declares
bankruptcy
(source: Bloomberg, Levin report, page 47)
April 12, 2007
SouthStar Funding LLC files for Chapter 7
(Source: Reuters)
April 26, 2007
Goldman Sachs closes Abacus 2007-AC1
CDO and sells $42 million of the AAA rated
tranches to the portfolio management division
of ACA and $909 million of the super senior
portion to ACA Financial Guaranty Corp.
(Source: Levin report, page 572).
April 27, 2007
Moody’s cuts ratings of $348 million of
Lehman CDOs
April 28, 2007
Bloomberg reports $450 billion of subprime
debt sold in 2006 has lost 37% of value
May 4, 2007
UBS closes $1.8 billion Dillon Read hedge
funds due to subprime mortgage losses
May 20, 2007
An internal Goldman Sachs analysis projected that Goldman would need to take from $248 to $440 million in write downs on unsold CDO securities and warehouse assets. (Source: Levin report, page 389).
May 31, 2007
Goldman Sachs dismantled the CDO Origination
Desk and moved all remaining CDO securities to
the Structured Product Group Trading Desk.
(Source: Levin report, page 390).
June 1, 2007
Standard and Poor’s and Moody’s Investor Services
downgrade over 100 bonds backed by second-lien
subprime mortgages
June 7, 2007
Bear Stearns suspends redemption rights for
hedge fund heavily invested in subprime debt
market after losing 19% of value in April alone (Source: www.businessweek.com)
June 10, 2007
Moody’s downgrades the ratings of $5 billion
worth of subprime RMBS and places 184 CDO
tranches on review for downgrade
June 12, 2007
S&P places $7.3 billion of 2006 vintage RMBS
on downgrade watch
June 17, 2007
Two Bear Stearns subprime hedge funds collapse
(Source: Levin report, page 47)
June 18, 2007
Goldman Sachs places $100 of the Timberwolf
CDO with Australian hedge fund Basis Capital.
In less than a month Goldman Sachs valuations
on the deal declined by $37.5 million and Basis
was required to post collateral.
June 20, 2007
Merrill Lynch seizes $850 million in assets from
the two Bear Stearns hedge funds. Merrill tries
to auction the bonds, but the auction fails
June 21, 2007
“Bear Stearns Fund Collapse Send Shock Through
CDOs” article on Bloomberg details losses on
mortgage-backed securities-related CDOs
June 23, 2007
Reuters reports that 50 major mortgage bankers
have folded
June, 2007
Washington Mutual shuts down Long Beach
Mortgage Corporation as a separate entity
(Source: Levin report, page 55).
June 29, 2007
On June 29, 2007, the ABX Index and the value
of single name CDS contracts referencing RMBS
and CDO securities plummeted in value and
continued dropping until mid-July. The head of
the Goldman Sachs Structured Products Group
Trading Desk wrote “There is absolutely no
support at the lower levels from the street…we are
in the middle of a market meltdown.”
(Source: Levin report, page 434).
June 30, 2007
Case-Shiller home price index for Dallas peaks.
(Source: Standard & Poor’s)
July 6, 2007
UBS fires CEO and the heir apparent for Chairman
of the Board Peter Wuffi (Source: www.ft.com)
July 9, 2007
Credit Suisse releases a report that shows
overall market CDO losses could total up to
$52 billion (Source: www.bloomberg.com)
July 10, 2007
S&P placed on credit watch 612 subprime RMBS
with an original value of $7.35 billion. Moody’s
downgraded 399 subprime RMBS with an original
value of $5.2 billion. (Source: Levin report, page 32).
July 12, 2007
S&P downgraded 498 of the 612 subprime
RMBS issues placed on credit watch on July 10, 2007.
(Source: Levin report, page 32).
July 13, 2007
Alliance Bancorp ceases operations and filed for
Chapter 7 bankruptcy 3 days later
(Source: www.reuters.com)
July 17, 2007
Bear Stearns sends letter to investors stating that
two Bear Stearns hedge funds specializing in
subprime debt have lost at least 90% of their value.
The funds invested only in AAA tranches of
subprime-related debt. (Source: investopedia.com)
July 19, 2007
CNN reports that “losses in the fast unraveling
subprime market could top $100 billion”
(Source: www.cnn.com)
July 24, 2007
Countrywide Financial announces 33% drop in
second quarter profits and says subprime mortgage
problems were spreading to conventional home loans (Source: www.ft.com).
July 31, 2007
Case-Shiller home price index for Atlanta peaks.
(Source: Standard & Poor’s)
July 31, 2007
Case-Shiller home price index for Portland peaks.
(Source: Standard & Poor’s)
July 31, 2007
Case-Shiller home price index for Seattle peaks.
(Source: Standard & Poor’s)
August 1, 2007
Bear Stearns’ two troubled funds file for bankruptcy
protection and the company freezes assets in a
third fund. (Source: www.investopedia.com)
August 2, 2007
Bailout of IKB Deutsche Industriebank AG due to
losses of up to one billion Euros on mortgage-related
CDOs (source: Bloomberg)
August 3, 2007
AXA rescues money market funds after subprime
losses (source: Reuters)
August 6, 2007
American Home Mortgage Investment Corp files
for bankruptcy (source: Bloomberg, Levin report, page 47)
August 6, 2007
It is revealed that ACA is vastly undercapitalized,
with an estimated $61 billion of CDO exposure,
which when combined with shareholder net worth
of $326 million implied a leverage ratio of 187:1,
well in excess of other monolines.
(Source: Barron’s, “Subprime’s ultimate time bomb”)
August 8, 2007
Mortgage Guarantee Insurance Corp, MGIC,
announces $1 billion loss
August 9, 2007
BNP freezes $2.2 billion of funds over subprime
(source: Reuters, Bloomberg)
August 10, 2007
HomeBanc files for Chapter 11 bankruptcy after
selling 5 retail branches to Countrywide (Source: www.usatoday.comwww.reuters.com)
August 14, 2007
17 Canadian structured investment vehicles fail
when commercial paper is denied by Canadian
banks (source: Bloomberg)
August 15, 2007
KKR Financial mortgage losses revealed
(source: Reuters)
August 16, 2007
Countrywide taps $11.5 billion commercial paper
back up line (source: Bloomberg)
August 17, 2007
Federal Reserve announces “[M]arket conditions
have deteriorated…downside risks to growth
have increased appreciably.”
(Source: Levin report, page 47)
August 24, 2007
Bank of America buys $2 billion in Countrywide
Financial preferred stock (Source:www.ft.com)
August 26, 2007
Landesbank Baden-Wurttemberg buys Sachsen
Landesbank, hurt by credit losses, for 250 million Euros
August 28, 2007
National Association of Realtors reports that
the supply of unsold homes in the US was at its
highest level in 16 years in July (Source: www.ft.com)
August 29, 2007
Basis Capital bankrupt in Australia due to U.S.
related credit derivatives (source: Reuters)
August 31, 2007
“Barclays rescues $1.6 billion Cairn Capital Fund”
due to U.S. mortgage losses (source: Bloomberg)
August 31, 2007
Ameriquest once the largest subprime lender in
the U.S. goes out of business.
(Source: Levin report, page 47)
August 31, 2007
Case-Shiller home price index for Charlotte is
the last of 20 cities to peak. (Source: Standard & Poor’s)
September 14, 2007
Bank of England rescues Northern Rock over
U.K. mortgage losses (source: Reuters)
September 17, 2007
Former Fed Chairman Alan Greenspan said
“we had a bubble in housing” and warns of
“large double digit declines” in home values
“larger than most people expect”
September 19, 2007
Goldman Sachs CFO David Viniar tells financial
analysts on a conference call that Goldman was
short mortgages and “that net short position
was profitable.” (Source: Levin report, page 466).
September 26, 2007
Bank of England announces an auction of 10
billion pounds sterling in emergency 3 month
funds and agrees to accept mortgages from banks
as collateral (Source: www.ft.com)
September 28, 2007
Northern Rock borrowings from Bank of England
reach 8 billion pounds Sterling (source: Reuters)
September 28, 2007
NetBank failure in the U.S. is the largest bank
failure since the S&L crisis (source: Reuters)
September 30, 2007
Washington Mutual halts subprime lending
completely. (Source: Levin report, page 55).
September 30, 2007
Secondary market for subprime loans dried up
in September (Source: Levin report, page 57)
October 1, 2007
UBS announces a $3.7 billion write-down and,
after the announcement, the chief executive of
its investment banking division Huw Jenkins was
replaced (Source: www.ft.com)
October 3, 2007
Morgan Stanley cuts 600 jobs
(Source: www.foxnews.com)
October 5, 2007
Merrill Lynch writes down $5.5 billion in losses
on subprime investments (source: Reuters)
October 15, 2007
Citigroup and Bank of America announce
“CP rescue fund” (source: Bloomberg)
October 16, 2007
Citigroup announces $3 billion in write-offs
on subprime mortgages (Source: www.ft.com)
October 17, 2007
Morgan Stanley cuts another 300 bankers
in credit trading, structured products, and
leveraged lending areas
October 18, 2007
Bank of America writes off $4 billion in
losses (source: Bloomberg)
October 19, 2007
Cheyne and IKB structured investment vehicles
default on commercial paper (source: Bloomberg)
October 23, 2007
“Greenspan says ‘State of Fear’ in Credit
Markets,” (source: Bloomberg)
October 24, 2007
Merrill Lynch writes down $7.9 billion on subprime
mortgages and related securities (source: Bloomberg, www.ft.com)
October 24, 2007
Home sales reach lowest level since records
began in 1999 (source: Bloomberg)
October 25, 2007
MBIA Structured Investment Vehicle funding
problems (source: Bloomberg)
October 26, 2007
Countrywide reports first loss in 25 years, losing
$1.2 billion in the third quarter (Source: www.ft.com)
October 30, 2007
S&P reports largest home price drop since 1991
(source: Reuters)
October 30, 2007
Merrill Lynch CEO O’Neal fired (source: Reuters)
November 5, 2007
Citigroup CEO Prince resigns after announcement
that Citigroup may have to write down as much as
$11 billion in bad debt from subprime loans.
(Source: Bloomberg)
November 6, 2007
Citigroup structured investment vehicles get
emergency funding (source: Bloomberg)
November 7, 2007
Morgan Stanley reports $3.7 billion in subprime
losses (source: Bloomberg)
November 9, 2007
Citigroup predicts industry losses of $64 billion
on CDOs (source: Reuters)
November 9, 2007
US’s fourth largest lender Wachovia revealed a
$1.1 billion loss due to decline in value of its mortgage
debt
November 13, 2007
Bank of America and SunTrust prop up money
market funds (source: Bloomberg)
November 13, 2007
Bank of America says it will have to write off $3
billion in bad debt (Source:http://news.bbc.co.uk)
November 13, 2007
Goldman CEO Lloyd Blankfein told a public
audience at a securities industry conference that
Goldman was, and would continue to be, net short
the subprime markets.
(Source: Levin report, page 470).
November 15, 2007
Barclays confirms a $1.6 billion write down in
the month of October on their subprime holdings.
The bank also released that more than £5 billion
in exposure to subprime loan packages could lead
to more write downs in the future
November 19, 2007
ACA Capital Holdings reports net losses for the
quarter ended September 30, 2007 as 1,041.0
million (source: www.sec.gov). ACA noted in its
10-Q, that, if downgraded below A-, collateral
would have to be posted to comply with standard
insurance agreements, and that ‘Based on current
fair values, we would not have the ability to post
such collateral”
November 21, 2007
Freddie Mac announces $2 billion in losses from
mortgage defaults (Source: www.ft.com)
November 23, 2007
Two French banks pledge $1.5 billion to bailout
bond insurer CIFG (Source www.ft.com)
November 27, 2007
Citigroup raises $7.5 billion in convertible securities
from Abu Dhabi Investment Authority
(Source: www.ft.com)
November 29, 2007
Bear Stearns cuts 650 more jobs, bringing total job
cuts to 1,500, 10% of its total work force.
(Source: www.ft.com)
December 3, 2007
Moody’s says it has already cut or might cut ratings
on debt of structured investment vehicles heavily
invested in the subprime market in an amount up
to $116 billion (Source: http://news.bbc.co.uk)
December 5, 2007
FNMA announces it will issue $7 billion in stock
and cut dividend by 30% (Source:www.ft.com)
December 6, 2007
The Royal Bank of Scotland announces that it
expects to write down 1.25 billion pounds of sterling
because of exposure to the U.S. subprime market. (Source: http://news.bbc.co.uk)
December 10, 2007
UBS announces another $10 billion in subprime
write-downs, bringing the total to date to $13.7
billion. UBS also announced a capital injection of
$11.5 billion from the government of Singapore
and an unnamed Middle East investor. (Source: www.marketwatch.com)
December 12, 2007
Federal Reserve establishes Term Auction Facility
to provide bank funding secured by collateral
(Source: Levin report, page 47)
December 14, 2007
Citigroup adds $49 billion to its balance sheet after
consolidating struggling off-balance sheet structured
investment vehicles (Source: www.ft.com)
December 19, 2007
Morgan Stanley announces $9.4 billion in write-downs
from subprime losses and a capital injection of
$5 billion from a Chinese sovereign wealth fund. (Source: www.ft.com)
December 19, 2007
S&P cuts ACA from “A” to “CCC” junk
(Source: Reuters)
December 20, 2007
Bear Stearns reports its first quarterly loss in
84 years, $854 million, after write downs of $1.9
billion on mortgage holdings (Source: www.ft.com)
December 31, 2007
During 2007, Moody’s reported that “8725 ratings
from 2116 [CDO] deals were downgraded and 1954
ratings from 732 deals were upgraded.
(Source: Levin report, page 32).
December 31, 2007
At the end of 2007, 84% of the total value of
Washington Mutual Option ARMS were negatively
amortizing, meaning that the borrowers were
going deeper into debt rather than paying off their
balances. (Source: Levin report, page 59)
January 9, 2008
MBIA slashes dividend more than 60% and
announces plans to raise $1 billion in debt
(Source: www.ft.com)
January 11, 2008
Countrywide announces sale to Bank of America
(Source: Levin report, page 47).
January 15, 2008
Citigroup reports a $9.83 loss in the fourth quarter
after taking $18.1 billion in write-downs on subprime
mortgage-related exposure. The firm also
announced it would raise $12.5 billion in new capital,
including $6.88 billion from the Government of
Singapore Investment Corporation
(Source: www.ft.com)
January 16, 2008
JPMorgan Chase says it has cut the value of its
investments in the US subprime market by $1.3
billion (Source: http://news.bbc.co.uk)
January 17, 2008
Lehman Brothers cuts 1,300 jobs in its domestic
mortgage division after previously cutting 2,500
jobs due to subprime lending problems. (Source: www.bankingtimes.co.uk)
January 17, 2008
Merrill Lynch announces net loss of $7.8 billion for
2007 due to $14.1 billion in write-downs on
investments related to subprime mortgages. (Source: http://news.bbc.co.uk)
January 19, 2008
Fitch downgrades Ambac from AAA to AA
(Source: www.ft.com)
January 21, 2008
WestLB announced that it expects to take a net
loss of $1.45 billion on exposure to the US subprime
mortgage market (Source: http://news.bbc.co.uk)
January 21, 2008
ACA counterparties sign “forbearance agreement”
in which they agreed to waive all collateral requirements,
policy claims, and termination rights until February
19, 2008. (Source: www.ft.com)
January 22, 2008
Ambac reports a record loss of $3.26 billion after write
downs of $5.21 billion on its guarantees of subprime
mortgage-related bonds. Source: (www.ft.com)
January 29, 2008
The FBI announces an investigation of accounting
fraud and insider trading at 14 lenders and investment
banks (Source: http://news.bbc.co.uk)
January 30, 2008
S&P either downgraded or placed on credit watch
over 8,200 ratings of subprime RMBS and CEO
securities, representing issuance amounts of
approximately $270.1 billion and $263.9 billion respectively. (Source: Levin report, page 32).
January, 2008
Markit Group Ltd., administrator of the ABX index
of RMBS, issued indices in 2006 and 2007 but did
not issue any new indices in 2008. (Source: Levin
report, pages 35 and 47)
February 5, 2008
GMAC reported a loss of $724 million in the fourth
quarter of 2007, bringing the total loss for the year
to $2.3 billion. GMAC’s struggling home lending unit,
Resdiential Capital, reported a $4.3 billion loss. (Source: http://news.bbc.co.uk)
February 8, 2008
Deutsche Bank reported that it had written down
2.2 billion Euros of subprime exposure in the third
quarter followed by minimal amounts in the fourth
quarter. (Source: http://news.bbc.co.uk)
February 12, 2008
Credit Suisse announced that its write downs on
subprime mortgage exposure totaled 2 billion Swiss
francs in 2007.
February 13, 2008
Data from Japan’s Financial Services Agency shows
that Japanese losses from the subprime crisis
total $5.6 billion in 2007.
February 14, 2008
Commerzbank reported $1.1 billion in write-downs
linked to the U.S. subprime crisis.
February 14, 2008
UBS confirmed a 2007 loss of $4 billion on $18.4
billion in write downs related to the subprime crisis.
February 17, 2008
Britain announces the Nationalization of Northern
Rock, with loans to Norhtern Rock reaching 25
billion pounds sterling. (Source: www.ft.com)
February 20, 2008
ACA secures another 30-day extension from
coutnerparties to come up with $1.7 billion owed
on CDOs that it insured. (Source: www.ft.com)
February 28, 2008
AIG announces a $5.2b billion loss for the fourth
quarter of 2007, its second consecutive quarterly
loss. AIG announced write-downs of $11.12 billion
pretax on its credit default swap portfolio.
(Source: www.ft.com)


To be continued.

Donald R. van Deventer
Kamakura Corporation
Honolulu
May 13, 2011

ABOUT THE AUTHOR

Donald R. Van Deventer, Ph.d.

Don founded Kamakura Corporation in April 1990 and currently serves as its chairman and chief executive officer where he focuses on enterprise wide risk management and modern credit risk technology. His primary financial consulting and research interests involve the practical application of leading edge financial theory to solve critical financial risk management problems. Don was elected to the 50 member RISK Magazine Hall of Fame in 2002 for his work at Kamakura.

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