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.

Read More

A Credit Crisis Chronology, Part 2 from March 2008 Through March 2009: This Time Isn’t Different

05/14/2011 01:03 AM

This blog is part two in Kamakura’s chronology of the credit crisis of 2007-2009, one of the most important eras for the study of risk management.  This blog summarizes the events that Kamakura’s risk professionals judged to be important milestones as the United States and many other countries were consumed by the credit crisis.  Today’s blog begins just prior to the collapse of Bear Stearns and ends in March 2009, the last period for which the Federal Research made public its loans during the crisis. A few milestone events after March 2009 are included as well.

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.  The University of Iowa chronology is enormously detailed and we have borrowed heavily from it.
  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 Kamakura credit chronology from September 2, 2004 through February 2008, “A Credit Crisis Chronology, Part 1 Through February 2008, This Time Isn’t Different,” is available at this link to the Kamakura blog for May 13, 2011:

http://www.kamakuraco.com/Blog/tabid/231/EntryId/282/A-Credit-Crisis-Chronology-Part-1-Through-February-2008-This-Time-Isnt-Different.aspx

The chronology continues from March 2008 through March 2009 here:

March 3, 2008
HSBC, the largest UK bank, reports a loss of $17.2 billion in write downs of its U.S. mortgage portfolio (Source: BBC News).
March 5, 2008
Credit Agricole, the largest French retail bank, reports a loss of $1.3 billion in the last three months because of the credit crisis (Source: BBC News).
March 10, 2008
Rumors of liquidity problems at Bear Sterns arise, and people begin selling financial stocks (Source: Financial Times).
March 10, 2008
Lehman brothers lays of 5% of its work force in addition to the 4000 jobs it eliminated earlier in the last year, most of which were in its mortgage operations (Source: Financial Times).
March 12, 2008
Bear Stearns CEO Schwartz states that, despite rumors, there is no threat to the bank’s liquidity (Source: CNBC).
March 12, 2008
The U.S. Federal Reserve offers to lend primary dealers up to $200 billion in Treasury securities for 28 day intervals, taking AAA rated mortgage backed securities as collateral, in order to boost liquidity of MBS market (Source: Financial Times).
March 13, 2008
Bear Stearns reports a $15 billion loss in cash and cash equivalents in two days. Liquid assets also dropped $2 billion mainly as a result of the loss of investor confidence (Source: Wall Street Journal).
March 13, 2008
The President’s Working Group on Financial Markets published a policy statement on how to improve the future of the financial markets by mitigating risk, revitalizing investor confidence, and promoting stable growth (Source: U.S. Department of Treasury).
March 13, 2008
A $22 billion mortgage-backed securities hedge fund run by Carlyle Capital Corporation fails (Source: Financial Times).
March 14, 2008
Federal Reserve and JPMorgan Chase agree to provide emergency funding for Bear Stearns. Under the agreement, JPMorgan would borrow from the Federal Reserve discount window and funnel the borrowings to Bear Stearns (Source: Forbes and www.datacenterknowledge.com).
March 14, 2008
The U.S. Treasury Secretary Paulson issued a set of policy recommendations to avoid repetition of the credit crisis. Paulson recommends tougher disclosure requirements for banks, introduction of a nationwide licensing system for mortgage brokers, strengthening state oversight of mortgage brokers, revisiting Basel II banking capital requirements, and having financial institutions raise more capital to reduce dividends (Source: Financial Times).
March 16, 2008
JPMorgan Chase agrees to pay $2 per share for Bear Stearns on Sunday, March 16, a 93% discount to the closing price on Friday March 14. JPMorgan agreed to guarantee the trading liabilities of Bear Stearns, effective immediately (Source: New York Times).
March 16, 2008
Federal Reserve agrees to provide up to $30 billion of financing to support Bear Stearns’ “less liquid” assets (Source: New York Times).
March 16, 2008
UBS reduces its balance sheet 20% by $520 billion (Source: Wall Street Journal).
March 17, 2008
A Time article reports that the credit default swap market may become unstable following the Bear Sterns bailout (Source: Time).
March 18, 2008
Goldman Sachs and Lehman Brothers’ net income for the first quarter of 2008 are half of what they were last year (Source: BBC News).
March 18, 2008
The Wall Street Journal highlights the Securities Exchange Commission’s inability to save Bear Sterns and react to crisis (Source: Wall Street Journal).
March 24, 2008
JPMorgan Chase raises bid for Bear Stearns from $2 per share to $10 per share. JPMorgan also agreed to bear the first $1 billion of losses on Bear Stearns assets, with the Federal Reserve bearing the next $29 billion of losses. (Source: The Times of London).
March 24, 2008
Federal Reserve Bank of New York forms Maiden Lane I to help JPMorgan Chase acquire Bear Stearns (Source: Levin report, page 47).
March 27, 2008
The Financial Services Authority issues a report highlighting regulation failures in their oversight of Northern Rock, the UK bank that had to be nationalized, such as high turnover of staff, inadequate number of staff, and limited contact with Northern Rock (Source: Financial Times).
April 1, 2008
UBS, whose share price fell 83% in the last year, reports it will write down $19 billion in the first quarter on its U.S. holdings (Source: Financial Times).
April 1, 2008
UBS CEO Ospel resigns after announcement that UBS total losses are almost $38 billion (Source: Bloomberg).
April 1, 2008
Deutsche Bank reports it will write down $3.9 billion in the first quarter largely due to its leveraged loan portfolio that included commercial real estate in the U.S. (Source: Financial Times).
April 2, 2008
A confidential option paper from the Financial Stability Forum, which urges delegates to push banks to replenish capital and increase disclosure, is released (Source: Financial Times).
April 2, 2008
A report by the Bank for International Settlements states that complex debt securities used to repackage bad asset backed bonds will most likely disappear from the bursting of the credit market bubble. More than 2,500 ratings have downgraded, and nearly $150 billion of CDOs have defaulted (Source: Financial Times).
April 2, 2008
Morgan Stanley announces that the bank is in the worse crisis of the past 30 years (Source: Financial Times).
April 8, 2008
The International Monetary Fund issues its Global Stability Report, which estimates credit crunch losses of over $945 billion (Source: Financial Times).
April 8, 2008
Citigroup begins negotiations with private equity firms to sell $12 billion in loans at discounted rates to lessen their exposure to the subprime crisis (Source: Financial Times).
April 8, 2008
Washington Mutual, the largest savings and loan association, receives a $7 billion capital injection (Source: Reuters).
April 11, 2008
The Council for Mortgage Lenders cautions that lending in the UK could decrease by half if fresh liquidity is not injected into the market (Source: Financial Times).
April 17, 2008
Merrill Lynch reports $1.96 billion in first quarter losses. The bank plans to cut 4,000 jobs, which totals roughly 10% of its staff (Source: BBC News).
April 18, 2008
Citigroup reports $5.11 billion in first quarter losses and $12 billion in write downs on subprime mortgage loans and other risky assets. The bank plans to cut 9,000 jobs in addition to the 4,200 jobs cut in January (Source: BBC News).
April 22, 2008
In order to support banks’ liquidity instead of solvency, the Bank of England offers to acquire UK banks’ mortgage-backed securities for a limited period of up to three years in exchange for Treasury bills (Source: Financial Times).
April 23, 2008
SEC releases new rules to govern credit rating agencies (Source: Financial Times).
April 23, 2008
Large U.S. financial groups raised upwards of $28 billion in capital markets in the past few days. Investors and bankers state the worst of the crisis is over (Source: Financial Times)
April 24, 2008
Banks attempt to sell a backlog of roughly $100 billion in leveraged loans (Source: Financial Times).
April 24, 2008
Persimmon, the largest house builder in the UK, reports that sales in the previous three weeks are down more than a third of what they were last year (Source: Financial Times).
April, 2008
CFI and the Audit Department publish a 12-page memorandum that confirms the presence of fraud at Washington Mutual (Source: Levin report, page 99).
May 6, 2008
The world’s largest reinsurer, Swiss Reinsurance Co., reports their profit fell roughly 53% following $782 million in credit market write downs (Source: Bloomberg).
May 6, 2008
UBS sells $15 billion of subprime mortgage debt at a 35% discount rate to Blackrock. This deal shows investors are betting that the cost of subprime debt is less than the gains they will collect when the market turns around (Source: Financial Times).
May 8, 2008
SEC chairman, Christopher Cox states that U.S. regulators will require banks to increase their amount of disclosure (Source: Financial Times).
May 9, 2008
AIG reports $7.81 billion in first quarter losses and $9.11 billion of write downs on the revaluation of their credit default swap portfolio. AIG Holding Company was also downgraded to AA- by two major rating agencies
May 11, 2008
Eighty private equity firms have begun to raise money to buy bad mortgage debt at discounted prices (Source: Financial Times).
May 12, 2008
HSBC, Europe’s largest bank, reports $3.2 billion in write downs during the first quarter of 2008 due to the U.S. sub-prime market (Source: BBC News).
May 13, 2008
The Financial Times publishes a write downs table that shows worldwide bank write offs totaling nearly $450 billion since January 2007 (Source: Financial Times).
May 13, 2008
MBIA, the world’s largest bond insurer, reports $2.4 billion in losses due to write downs of credit default swaps in the deteriorating credit market (Source: Financial Times).
May 14, 2008
According to a report by Fitch Ratings, banks have written off 80% of subprime losses. Fitch also estimates that there will be $400 billion of total losses on subprime mortgage backed securities and collateralized debt obligations (Source: Financial Times).
May 15, 2008
Barclays reports £1 billion in credit write downs (Source: BBC News).
May 16, 2008
The Reuters/University of Michigan consumer confidence index fell to its lowest level in 28 years due to a decrease in confidence in the financial markets and an increase in the cost of food and fuel (Source: Financial Times).
May 16, 2008
The Federal Reserve Bank, which consistently stated that central banks have minimal power to stop asset bubbles from inflating and bursting, plans to revisit its hands-off monetary policy in regards to the housing market crash (Source: Financial Times).
May 21, 2008
An investigation by the Financial Times found that Moody’s incorrectly awarded AAA ratings to billions of dollars of complex debt products because of a flaw it its computer models (Source: Financial Times).
May 21, 2008
Moody’s downgrades CIFG, a French bond insurer, from A1 to Ba2 (Source: Financial Times).
May 22, 2008
Moody’s initiated a review of $4 billion of ratings affected by a computing error. The company’s stock price falls 16% (Source: Financial Times).
May 29, 2008
Bear Stearns shareholders approve sale and the acquisition by JPMorgan Chase is completed (Source: Levin report, page 47).
June 2, 2008
Wachovia CEO Thompson is ousted following large losses that resulted from the acquisition of a big mortgage lender at the peak of the housing market (Source: Reuters).
June 4, 2008
Moody’s re-evaluates AAA ratings of Ambac and MBIA, the two large bond insurers. Moody’s states the ratings are probably going to be downgraded to AA. (Source: Financial Times).
June 5, 2008
NY Attorney General, Andrew Cuomo reveals rating agency reform agreements with Standard & Poor, Moody’s, and Fitch. Agreements involve implementing a fee-for-service structure, disclosing more information with investors, reviewing individual mortgage lenders, due diligence reforms, credit agency independence, and the requirement of warranties from investment banks for loans underlying mortgage-backed securities (Source: Office of the Attorney General).
June 6, 2008
Standard & Poor reports that it is downgrading the ratings of the bond insurers MBIA and Ambac by two notches down to AA (Source: Financial Times).
June 13, 2008
Subsequent to Moody’s reports of bad ratings last month, Standard & Poor announces errors in computer rating models that rated complex debt products (Source: Financial Times).
June 16, 2008
Lehman Brothers reports a $2.8 billion second quarter loss, which marks the first loss in 14 years since it became a public company. The president and CFO were removed. Lehman reduced its residential mortgage portfolio by 31% and its commercial mortgage exposure by 19% (Source: Financial Times).
June 16, 2008
The SEC plans to implement new rules that will tighten oversight of credit rating agencies by increasing disclosure methods, creating a different rating system for complex securities, and prohibiting agencies from rating securities the help issuers design (Source: Financial Week).
June 19, 2008
Marking the first criminal charges in the credit crisis, former Bear Sterns hedge fund managers, Ralph Ciofi and Matthew Tannin, are arrested. The two ran funds that lost bets on subprime mortgage backed securities and are under speculation for securities fraud (Source: Financial Times).
June 19, 2008
The FBI reveals “Operation Malicious Mortgage,” a crackdown on mortgage fraud. The operation involves 406 defendants, 144 cases, and roughly $1 billion in losses (Source: Financial Times).
June 22, 2008
Bond insurers begin discussing the option of wiping out $125 billion of insurance on complex securities with banks (Source: Financial Times).
June 23, 2008
Dexia sets up a $5 billion credit line for its U.S. bond insurance division (Source: Financial Times).
June 25, 2008
Shareholders of Countrywide, a troubled mortgage lender, approve the acquisition of the company by Bank of America (Source: Financial Times).
June 26, 2008
The SEC attempts to reduce investors’ dependency on credit ratings by reducing explicit references to credit ratings in its own market rules (Source: Financial Times).
June 27, 2008
Bloomberg reported that 36% of all asset-backed CDOs and 19% of all CDOs in total have defaulted, resulting in a total of $220 billion in CDO defaults (Source: Bloomberg).
July 2, 2008
U.S. Secretary of Treasury, Henry Paulson, calls for regulatory changes that would allow banks to fail without threatening the entire stability of the market and warns banks to not depend on the government for bailouts during the crisis (Source: Financial Times).
July 7, 2008
Merriam-Webster Inc officially adds the word “subprime,” which is defined as “having or being an interest rate that is higher than a prime rate and is extended especially to low-income borrowers,” to the English language (Source: Merriam Webster).
July 8, 2008
Shares in Fannie Mae and Freddie Mac, the government sponsored mortgage financiers, plunged roughly 20% as investors sell off their shares in fear because a Lehman Brothers analyst reported that the companies may have to raise an extra $75 billion in fresh capital due to a change in an accounting rule (Source: Financial Times).
July 8, 2008
The SEC reports that credit rating agencies failed to manage conflicts of interest by assigning top ratings to securities with issuers that paid the rating agencies (Source: Financial Times).
July 9, 2008
EU finance ministers agree to implement stricter regulations on credit rating agencies, which contributed to the credit crisis by poorly assessing the risk of complex securities. All credit rating agencies in the UK must now register with EU regulators (Source: http://www.guardian.co.uk/).
July 10, 2008
CEO of UK’s house building company Barrat Developments, Mark Claire, reported that Barrat would cut 1,200 out of its 6,700 workers and that job cuts in the sector could reach up to 60,000 in the UK (Source: Financial Times).
July 11, 2008
IndyMac Bank, a $30 billion subprime mortgage lender fails and is seized by FDIC (Source: Levin report, page 47 and page 234) after depositors withdraw $1.55 billion.
July 13, 2008
Investors increasingly begin short selling the stock of Freddie Mac and Fannie Mae and profiting off of the turmoil of the two mortgage financiers. This causes the financial situation of both companies to worsen, but investors believe the government will bail out debt holders (Source: Financial Times).
July 13, 2008
The U.S. Treasury and Federal Reserve produce a roadmap of how they can help Freddie Mac and Fannie Mae, making it apparent they will provide a liquidity backstop if needed (Source: Financial Times).
July 14, 2008
U.S. Treasury secretary Hank Paulson reveals three-pronged rescue plan for Freddie Mac and Fannie Mae. The Treasury will be authorized to increase its $2.25 billion lines of credit to the mortgage lenders, the Treasury can purchase equity in the companies if called for, and Freddie and Fannie will be able to borrow from the Fed’s discount window (Source: Financial Times).
July 15, 2008
SEC restricts naked short selling of some financial stocks (Source: Levin report, page 47).
July 17, 2008
Merrill Lynch writes down $9.4 billion on mortgage related assets (Source: Financial Times).
July 17, 2008
Despite $2.4 billion in second quarter write downs, JPMorgan Chase does better than expected with a net income of $2 billion or 54 cents per share. During the same period last year the bank made $4.23 billion or $1.20 per share (Source: Financial Times).
July 17, 2008
Goldman Sachs earned $2.09 billion overall in the second quarter, but lost $775 million on non-investment grade credit origination (Source: Financial Times).
July 19, 2008
Citigroup lost $5.2 billion and had $7.2 billion of write downs in the second quarter (Source: Financial Times).
July 22, 2008
Congressional researchers report U.S. Treasury’s plan to protect Fannie Mae and Freddie Mac could cost taxpayers $25 billion (Source: Financial Times).
July 22, 2008
Marking the largest loss in the history of the fourth largest U.S. bank, Wachovia loses $8.9 billion in the second quarter (Source: Financial Times).
July 23, 2008
U.S. House of Representatives approved a bill that would rescue Freddie Mac and Fannie Mae in addition to allowing the government to guarantee up to $300 billion in mortgages refinanced through the Federal Housing Administration (Source: Financial Times).
July 24, 2008
New York attorney general Cuomo files charges against UBS for selling falsely marketing auction-rate securities as safe and liquid (Source: Financial Times).
July 26, 2008
Washington Mutual borrows $10 billion from the Federal Reserve’s discount window, the Federal Home Loan Banking system, and open market operations to bolster on hand liquidity (Source: Financial Times).
July 29, 2008
U.S. home prices reportedly dropped a record 15.8% in May (Source: Financial Times).
July 30, 2008
The Federal Reserve increases liquidity support to primary dealers by offering three month cash loans to banks, opening a new options auction facility, and extending access to emergency cash and loans of Treasury securities until January 30 (Source: Financial Times).
July 30, 2008
The SEC extends emergency order to prohibit short selling of Fannie Mae, Freddie Mac, and 17 other banks until August 12 (Source: Financial Times).
July 31, 2008
Deutsche Bank announces more write downs, bringing its total to $7.8 billion for the year (Source: Financial Times).
July 31, 2008
Depositors withdraw $10 billion from Washington Mutual in wake of IndyMac failure (Source: Levin report, page 57).
July 31, 2008
Massachusetts’s Secretary of State, William Galvin, writes an 80 page complaint accusing Merrill Lynch of fraud in their selling techniques of auction-rate securities (Source: Financial Times).
August 1, 2008
The Federal Deposit Insurance Corporation issues cease and desist orders to four small U.S. banks that could not handle potential loan losses (Source: Financial Times).
August 4, 2008
David Aufhauser, general counsel to UBS’s investment banking division, resigns after NY Attorney General Cuomo accuses him and other top bank executives of selling personal holdings on insider information (Source: Financial Times).
August 4, 2008
HSBC warns that the credit crisis is spreading to Asia where emerging markets will be inevitably affected by economic slowdown in the U.S. (Source: Financial Times).
August 6, 2008
Banks such as Goldman Sachs, JPMorgan Chase, Merrill Lynch, Citigroup, Lehman Brothers, and Morgan Stanley propose reforms to limit the scope of their businesses by spending more on risk management and inhibiting the number is investors able to purchase complex financial products such as auction rate securities (Source: Financial Times).
August 6, 2008
Dexia injects $300 million in FSA (Source: www.dexia.com).
August 7, 2008
Dexia’s FSA Faux Pas (Source: Forbes).
August 7, 2008
UK housing prices drop 11% from January to July (Source: Financial Times).
August 7, 2008
As a result of large subprime write downs and a $5.4 billion loss in the second quarter, AIG shares drop 19.1%, marking its biggest daily drop in 39 years (Source: Financial Times).
August 8, 2008
Fannie Mae and Freddie Mac own roughly $5,300 billion in U.S. mortgages. Fannie Mae states we are in the worst housing market in the last 70 years (Source: Financial Times).
August 8, 2008
Under months of regulatory pressure, Citigroup agrees to buy back $7.5 billion of auction rate securities, UBS agrees to buy back $19 billion, and Merrill Lynch agrees to buy back up to $12 billion to compensate tens of thousands of investors who found themselves trapped in a frozen market (Source: Financial Times).
August 8, 2008
The Royal Bank of Scotland reports a £691 million loss in the first half of 2008 due to £5.9 billion in write downs linked to subprime U.S. mortgages (Source: Financial Times).
August 9, 2008
UBS agrees to repurchase $19 billion of Auction Rate Securities debt, which settles the civil lawsuits against UBS brought by NY Attorney General Cuomo (Source: Financial Times)
August 10, 2008
The Royal Bank of Scotland sells $8 billion of deeply discounted debt to private equity firms (Source: Financial Times).
August 11, 2008
Morgan Stanley offers to buy back $4.5 billion in auction rate securities, but NY Attorney General Cuomo rejects the offer as “too little, too late” and is currently investigating the company’s sale practices of auction rate securities (Source: Financial Times).
August 12, 2008
Banks like Citigroup, Deutsche Bank, and the Royal Bank of Scotland have sold $25-30 billion of bad loans at discounted rates to private equity firms. However, banks still remain at risk because private equity firms will only cover up to 20 cents on the dollar before additional losses are shared with banks (Source: Financial Times).
August 12, 2008
JPMorgan Chase reports $1.5 billion in write downs in July, and bankers state July was the worst month for mortgage-backed securities since the start of the crisis (Source: Financial Times).
August 12, 2008
Bloomberg reveals total losses due to U.S. subprime mortgage market crash reach over $500 billion (Source: Bloomberg).
August 13, 2008
According to the website implode-o-meter, 273 major U.S. lending companies have imploded since 2006 (Source: http://ml-implode.com/).
August 10, 2008
Former IMF chief economist, Kenneth Rogoff, warns that the worst of the credit crisis is yet to come and a major U.S. bank may fail in the next few months (Source: The Times).
August 20, 2008
Lehman Brother’s attempted secret deals to sell 50% of its shares to South Korean or Chinese parties fail. Shares have fallen nearly 85% since 2007 (Source: Financial Times).
August 27, 2008
Bloomberg publishes a table of the amount of write downs and capital raised of the world’s largest banks and securities firms. Overall, write downs have reached $506 billion and firms have raised $352.6 billion to deal with them (Source: Bloomberg, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDmQ66OoJbfw#).
September 7, 2008
U.S. takes control of Fannie Mae & Freddie Mac (Source: Levin report, page 47). The two companies currently have $5400 billion in outstanding liabilities and guarantee three-quarters of new U.S. mortgages. The government agreed to inject up to $100 billion in each of them and will buy mortgage backed bonds (Source: Financial Times).
September 8, 2008
Washington Mutual ousts CEO Killinger. As a result of the credit crisis, the company’s share price fell from $40 in the summer of 2007 to $3 in fall 2008 (Source: Financial Times).
September 8, 2008
Bloomberg reports over $17 trillion in global equity value has been wiped out by collapse of subprime debt market and U.S. housing recession (Source: Bloomberg).
September 10, 2008
Fannie Mae sells $7 billion bonds to domestic investors (Source: Financial Times).
September 10, 2008
607 civil cases linked to the current financial crisis were filed in federal court in the last 18 months ending in June 2008 (Source: Financial Times).
September 11, 2008
Lehman Brothers reports its worst ever third quarter as it lost $3.9 billion total and $7.8 billion in credit linked write downs. The company plans to shrink its size (Source: Financial Times).
September 12, 2008
Moody’s and Standard & Poor threaten to downgrade Lehman Brother’s rating (Special Inspector General of the Troubled Asset Relief Program Report, page 8).
September 13, 2008
Lehman Brothers tries to find a company willing to acquire it, and Bank of America seems like the front runner (Source: Financial Times).
September 13, 2008
The U.S. Treasury and Federal Reserve refuse to provide public funds to help with a rescue takeover for Lehman Brothers as they did for Bear Sterns. Bank of America backs out of negotiations with Lehman Brother because of the lack of government funds (Source: Financial Times).
September 14, 2008
Merrill Lynch, whose share price has dropped nearly 70% in the past year, enters into talks about being bought by Bank of America (Source: Financial Times).
September 15, 2008
Ten of the largest banks agree to pool $70 billion in a liquidity fund in attempt to mitigate the impact of the expected failure of Lehman Brothers. Each bank can borrow up to one third of the fund by pledging collateral. The Fed also makes new efforts to mitigate risk by relaxing regulations for Fed loans until January 20, 2009 (Source: Financial Times).
September 15, 2008
Lehman Brothers bankruptcy (Source: Levin report, page 47).
September 15, 2008
Merrill Lynch announces sale to Bank of America (Source: Levin report, page 47).
September 15, 2008
Three major rating agencies downgrade AIG debt (SIGTARP Report, page 8).
September 16, 2008
Federal Reserve offers $85 billion credit line to AIG; Reserve Primary Money Fund NAV falls below $1 (Source: Levin report, page 47).
September 16, 2008
Barclays agrees to pay $1.75 billion to take on core Lehman Brothers businesses, including $72 billion of trading assets and $68 billion of trading liabilities (Source: New York Times and The Guardian).
September 16, 2008
Russia stops trading as shares fall up to 20% in one day. The government injects $14.16 billion into the market (Source: Financial Times).
September 18, 2008
Dexia announces Lehman-related losses estimated to be around €350 million (Source: www.dexia.com press release)
September 18, 2008
Lloyds rescues HBOS, the largest mortgage lender in the UK (Source: Reuters).
September 18, 2008
In an effort to ease the financial crisis, the Federal Reserve nearly quadrupled the amount that central banks such as the European Central Bank and Bank of Japan can offer to $247 billion (Source: Bloomberg).
September 19, 2008
Russia re-opens its market after a two day close. The market rose roughly 30% as a result of the government’s rescue plan to provide a total of $100 billion to alleviate the credit squeeze (Source: Financial Times).
September 19, 2008
The Financial Services Authority bans short selling of financial stock in the UK until January 16, 2009 (Source: Financial Times).
September 19, 2008
U.S. Treasury Secretary Paulson pushes for Congress to pass legislation that will allow the government to buy up to $700 billion of toxic assets from banks (Source: U.S. Treasury).
September 19, 2008
U.S. Treasury announces it will use up to $50 billion to insure money market mutual funds (Source: Financial Times).
September 21, 2008
Goldman Sachs and Morgan Stanley convert to bank holding companies (Source: Levin report, page 47).
September 15-23, 2008
Depositors withdraw $17 billion from Washington Mutual (Source: Levin report, page 57).
September 22, 2008
Australia, the Netherlands, and Taiwan ban short selling (Source: Wall Street Journal).
September 23, 2008
Nomura pays $225 million for Asia offices of Lehman Brothers (Source: The Age).
September 24, 2008
Warren Buffet’s company Berkshire Hathaway is to invest $5 billion in Goldman Sachs (Source: Wall Street Journal).
September 25, 2008
Washington Mutual fails, subsidiary bank is seized by the FDIC and sold to JPMorgan Chase for $1.9 billion. JPMorgan Chase immediately wrote off $31 billion in losses on the Washington Mutual assets. (Source: The Guardian and Levin report, page 47).
September 26, 2008
JPMorgan issues $8 billion in common stock in conjunction with Washington Mutual takeover (Source: The Guardian).
September 28, 2008
Washington Mutual Inc., the holding company left after banking operations were seized, files for Chapter 11 bankruptcy (Source: The Seattle Times).
September 29, 2008
The House of Representatives votes against the $700 billion bailout bill. The S&P 500 fell 8.8%, the Dow Jones fell 7%, and financial stocks plunged as much as 64.7% in response to this news (Source: Financial Times).
September 29, 2008
Citigroup announces its intention to buy Wachovia, which later falls through (Source: SIGTARP report, page 8).
September 30, 2008
European governments bail out Dexia in €6.4bn rescue deal (Source: The Telegraph).
September 30, 2008
Ireland guarantees to protect all deposits in six of its largest banks (Source: Financial Times).
October 1, 2008
Dexia chairman and president resign (Source: Associated Press).
October 1, 2008
The monoline insurance company MBIA sues mortgage lender Countrywide Financial for fraudulently getting MBIA to insure bad loans that cost the company over $459 million in insurance payouts (Source: Financial Times).
October 1, 2008
Congress approves an updated version of the bill that includes final Troubled Asset Relief Program language (Source: SIGTARP report, page 12).
October 3, 2008
Congress and President Bush establish Troubled Asset Relief Program (TARP), which is created by the Emergency Economic Stabilization Act (EESA) (Source: Levin report, page 47, SIGTARP report, page 2). The revised bailout plan allows the Treasury to restore stability to the financial system by buying $700 billion in toxic debt from banks (Source: CNN).
October 3, 2008
Wells Fargo announces its plan to buy Wachovia (Source: SIGTARP report, page 11).
October 3, 3008
California Governor Schwarzenegger tells Federal Government the state needs a $7 billion loan because of the frozen credit markets (Source: Financial Times).
October 4, 2008
Wells Fargo offers $15.1 billion to buy Wachovia, outbidding Citigroup’s $2.2 billion bid (Source: Financial Times).
October 6, 2008
Germany announces €50 billion bail-out of Hypo Real Estate AG (Source: USAToday).
October 6, 2008
Germany announces unlimited guarantee of €568 billion in private bank deposits (Source: USAToday).
October 6, 2008
The French President, Nicolas Sarkozy, calls an emergency meeting in Paris. Leaders of Italy, France, Germany, and the UK pledge to protect EU banks from failing (Source: Wall Street Journal).
October 6, 2008
Bank of America settles charges of predatory lending against subsidiary company Countrywide Financial by agreeing to offer more affordable mortgage payments to borrowers (Source: Financial Times).
October 6, 2008
Iceland announces new emergency plan that allows the government to nationalize, merge, or force bankruptcies on banks (Source: Financial Times).
October 7, 2008
The Dow Jones Industrial Average falls below 10,000, reaching its lowest level since 2004 (Source: Financial Times).
October 7, 2008
Iceland seeks a $5.43 billion loan from Russia (Source: Bloomberg).
October 7, 2008
Spain establishes a $68 billion fund to purchase bank assets (Source: Bloomberg).
October 7, 2008
The Federal Reserve establishes a fund to buy commercial paper, an important tool that drives commerce for businesses (Source: Bloomberg).
October 8, 2008
The UK government implements £400 billion rescue plan that includes government investing in banking industry, guaranteeing up to £250 billion of bank debt, and adding £100 billion to the Bank of England’s short-term loan scheme (Source: Financial Times).
October 9, 2008
As a result of the burden of foreign debt, Iceland’s government seized control of Kaupthing Bank, the nation’s largest bank (Source: Bloomberg).
October 11, 2008
The Dow Jones has its highest volatility day in the past 112 years after its worst week ever in which it dropped 22% (Source: Wall Street Journal).
October 12, 2008
Wachovia sold to Wells Fargo (Source: Levin report, page 47).
October 13, 2008
European governments collaboratively pledge $2,546 billion to boost their financial markets (Source: Financial Times).
October 13, 2008
The UK government injects £37 billion in the nation’s three largest banks, kicking off the nationalization process (Source: Financial Times).
October 13, 2008
Morgan Stanley issued to Mitsubishi UFJ Financial Group 7,839,209 shares of Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock for an aggregate purchase price of $7.8 billion (Source: October 10, 2009 investor presentation by Morgan Stanley CFO Colm Kelleher).
October 13, 2008
Germany announces it will inject €500 billion into its financial market (Source: Financial Times).
October 13, 2008
The French President, Nicolas Sarkozy, announces France will give $435 billion in aid to banks (Source: Financial Times).
October 14, 2008
The U.S. government announces capital injection of $250 billion, of which $125 billion will go to 9 large banks as part of the Capital Purchase Program (CPP) in exchange for more government control on items such as executive compensation (Source: Financial Times, SIGTARP report, page 1).
October 14, 2008
Japan unveils plan to strengthen its financial markets by lifting restrictions on companies buying back their shares, suspending the sale of government owned stocks, and requiring increased disclosure on short selling (Source: Financial Times).
October 14, 2008
Australia reveals $10.4 billion stimulus package (Source: Financial Times).
October 15, 2008
Greece reveals €28 billion package to support banking sector (Source: Financial Times).
October 16, 2008
Switzerland government gives UBS a $59.2 billion bailout (Source: Bloomberg).
October 17, 2008
The European Union’s 27 leaders agreed to a $2.7 trillion bank bailout and a revision of the rules that govern international finance (Source: Financial Times).
October 19, 2008
The South Korean government reveals a $130 billion rescue package (Source: Financial Times).
October 20, 2008
The French government plans to inject $14 billion into its six largest banks (Source: Financial Times).
October 21, 2008
The U.S. Federal Reserve announces it will buy up to $540 billion in debt from money market mutual funds to help unfreeze the market (Source: Financial Times).
October 22, 2008
Wachovia loses $24 billion as customers drain a quarter of their deposits (Source: Bloomberg).
October 24, 2008
AIG borrows $90.3 billion out of the $123 billion government rescue fund to pay off bad debts (Source: Washington Post).
October 24, 2008
In a $5.6 billion deal supported by the U.S. government, PNC Financial Services Group Inc is to acquire National City Corp, an Ohio-based lender (Source: Reuters).
October 27, 2008
Nineteen regional American banks receive government bailout funds of $35.18 billion (Source: Bloomberg).
October 28, 2008
U.S. uses TARP to buy $125 billion in preferred stock at 9 banks (Source: Levin report, page 47). The 9 banks held over $11 trillion in banking assets or roughly 75% of all assets owned by U.S. banks (Source: SIGTARP report, page 1).
October 28, 2008
The Bank of England reports that worldwide financial firms have lost $3.8 trillion due to the credit crisis (Source: BBC News).
November 1, 2008
JPMorgan Chase reveals plan to restructure $70 billion in mortgages for as many as 400,000 borrowers who are having trouble with their payments (Source: Wall Street Journal).
November 4, 2008
A week after assuring investors of their stability, two of Brazil’s largest banks announce they will merge (Source: Wall Street Journal).
November 5, 2008
Barrack Obama wins the U.S. presidency, and exit polls reveal that roughly 60% of voters are foremost concerned about the economy (Source: Financial Times).
November 9, 2008
AIG receives a revised $150 billion government bailout (Source: Financial Times).
November 10, 2008
Fitch rating agency downgrades many emerging markets and foreign currency ratings due to credit crisis (Source: Financial Times).
November 12, 2008
U.S. Treasury Secretary Paulson drops former plan to buy toxic assets with TARP funding. Instead, he advocates for using the remaining $410 billion to recapitalize financial companies (Source: Financial Times).
November 12, 2008
Hypo Real Estate AG announces €3.1 billion pre-tax losses largely due to real estate exposure at Depfa Bank plc (Source: USAToday)
November 14, 2008
Dexia sells Financial Security Assurance after €1.5 billion third quarter loss (Source: Financial Times).
November 17, 2008
The Treasury Department issues the second round of distributions of the $700 billion bailout plan by giving $33.6 billion to 21 banks (Source: CNN Money).
November 23, 2008
U.S. gives government bailout to Citigroup, agreeing to cover losses on roughly $306 billion of Citigroup’s risky assets (Source: Reuters).
November 25, 2008
Federal Reserve buys Fannie and Freddie assets (Source: Levin report, page 47).
November 25, 2008
The U.S. Federal Reserve pledges an additional $800 billion to boost financial markets. Up to $600 billion will go to buying mortgage bonds issued by government-sponsored housing enterprises and up to $200 billion to holders of AAA rated securities (Source: Financial Times).
November 30, 2008
The World Bank launches a Debt Management Facility to help avoid future debt problems (Source: World Bank).
December 9, 2008
Standard & Poor downgrades Russia’s rating to BBB (Source: Financial Times).
December 17, 2008
The Federal Reserve lowers interest rates from 1% to 0-0.25%, surprising economist and losing its best tool to help combat the recession (Source: Financial Times).
December 18, 2008
President George W. Bush reveals plan to rescue General Motors and Chrysler by lending them a total of $17.4 billion (Source: Financial Times).
December 19, 2008
Bank of Japan cuts its interest rate to 0.1% (Source: Financial Times).
December 20, 2008
Standard & Poor downgrades credit ratings of 11 of the world’s largest banks (Source: Financial Times).
January 10, 2009
Unemployment rates in the U.S. reach 6.2%, the highest in 16 years (Source: Financial Times).
January 14, 2009
Standard & Poor cuts Greece’s credit rating on debt and other western European countries are being closely watched (Source: Financial Times).
January 15, 2009
The U.S. government gives Bank of America an additional $20 billion as part of TARP’s Targeted Investment Program (TIP), which allows the Treasury to make additional targeted investments than what was given under TARP’s Capital Purchase Program (Source: SIGTARP report, page 1). Furthermore, the government agrees to guarantee nearly $118 billion of potential losses on troubled assets (Source: Financial Times).
January 16, 2009
The U.S. Senate votes to use the remaining $350 billion of the TARP funds (Source: Financial Times).
January 19, 2009
Standard & Poor downgrades Spain’s AAA rating on debt (Source: Financial Times).
January 26, 2009
Prime Minister of Iceland Geir Haarde steps down following the country’s economic collapse during the financial crisis (Source: Financial Times).
January 26, 2009
Fannie Mae and Freddie Mac report they will need $51 billion in government funding to continue operations (Source: Reuters).
January 27, 2009
Japan unveils $14.7 billion stimulus package (Source: Reuters).
February 7, 2009
The U.S. unemployment rate jumps to 7.6% from the 4.4% it was at before the financial crisis. In the last year, 3.5 million jobs were lost (Source: Financial Times).
February 14, 2009
International Monetary Fund Director, Dominique Strauss-Kahn, warns that the rest of the world may be pulled into the recession that has already hit advanced economies if we do not focus on cleaning up the problems now (Source: International Monetary Fund).
February 14, 2009
Marking its worst performance in 30 years, the Japan economy shrinks 3.3% in the fourth quarter (Source: Financial Times).
February 17, 2009
President Barack Obama signs a $787 billion stimulus package (Source: MSN).
February 18, 2009
The Boston Consulting Group estimates that the credit crisis has depleted $5.5 trillion off the market value of banks, which is equal to 10% of global GDP (Source: Reuters).
February 19, 2009
U.S. bank stocks fall to their lowest level in 17 years, and the Dow Jones Industrial Average falls to its lowest in 6 years (Source: Financial Times).
February 27, 2009
The U.S. Treasury announces it will take 36% of Citigroup’s shares, becoming the largest single shareholder (Source: Financial Times).
March 1, 2009
The U.S. government extends a $30 billion lifeline to AIG, marking its third rescue to the insurance company since September (Source: Financial Times).
March 3, 2009
The Federal Reserve and U.S. Treasury reveal the Term Asset-Backed Loan Facility (TALF) program to promote lending to small businesses and consumers (Source: Reuters).
March 9, 2009
Dexia posts €3.3 billion in losses for 2008 (Source: www.neurope.de).
March 9, 2009
The Icelandic Financial Supervisory Authority nationalizes the last major Icelandic bank, Straumur Burdaras (Source: Reuters).
March 17, 2009
Reports reveal that the rate of credit card defaults in February within the U.S. have reached their highest level in the past 20 years (Source: Reuters).
March 18, 2009
The Federal Reserve plans to buy $300 billion of U.S. government debt to reduce U.S. Treasury bond yields and the dollar (Source: Financial Times).
March 18, 2009
The Bank of Japan plans to give $10.1 billion to large commercial banks (Source: Financial Times).
March 20, 2009
German parliament passes Hypo Real Estate Nationalization bill (Source: Deutsche Welle)
March 23, 2009
The U.S. Treasury reveals the Public-Private Investment Program, which will use $75-$100 billion from TARP and private investors to generate $500 billion in purchasing power to buy legacy assets (Source: U.S. Treasury. http://www.treasury.gov/press-center/press-releases/Pages/tg65.aspx).
March 26, 2009
Due to the credit crisis and lack of confidence in the markets, worldwide mergers and acquisitions fall by $444 billion or 33% in the first quarter (Source: Reuters).
March 30, 2009
The Spanish government rescues its first bank during the financial crisis (Source: Financial Times).
June 2, 2009
Hypo Real Estate AG shareholders vote on rescue by government that would take German government ownership of Hypo Real Estate to 90% (Source: Deutsche Welle).
October 13, 2009
100% acquisition of Hypo Real Estate by German government rescue fund SoFFin completed (Source: Reuters).
September 11, 2009
By this point in time over 670 banks received a total of $204.55 billion under the TARP’s Capital Purchase Program (Source: SIGTARP report, page 1).
September 12, 2010
German government adds another €50 billion in aid to Hypo Real Estate AG bringing total support to €142 billion (Source: Business Standard).

Donald R. van Deventer and Stephanie Yasunaga
Kamakura Corporation
Honolulu
May 14, 2011

Copyright © 2011 by Donald R. van Deventer. All Rights Reserved.

 

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.

Read More