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Financial Crisis and Recovery   Tags: business_law, corporations, government_information, securities_law  

In 2007, the worst financial crisis since the Great Depression commenced in the United States and much of the rest of the developed world. This research guide provides links to resources on the crisis and its aftermath.
Last Updated: Jul 22, 2014 URL: http://libraryguides.law.pace.edu/financialcrisis Print Guide RSS Updates

Financial Crisis Timeline Print Page
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Background Events

1980:  The Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn–St. Germain Depository Institutions Act of 1982 deregulate savings and loan institutions ("thrifts"), allowing them to offer a wider array of savings products, expanding their lending authority, insuring their deposits by the FDIC and reducing regulatory oversight and capital requirements.  Thrift institutions expand into new and more complex types of transactions.  Fraudulent deals increase, and when the real estate market collapses, many of these institutions fail.  The FDIC bails out the failed thrifts with taxpayer dollars. 

1999:  The Gramm-Leach-Bliley Act repeals provisions of the Glass-Steagall Act of 1933 that prohibit a single institution from conducting both commercial and investment banking operations.  Deregulation allows growth of giant financial institutions that merge investment banks and commercial banks, increasing complex, risky financial transactions, but without raising capital reserve requirements.

 

Financial Crisis Timeline - 2007

SEE ALSO Frontline, "Inside the Meltdown," Chronology:  http://www.pbs.org/wgbh/pages/frontline/meltdown/cron/

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.

April 2, 2007 - New Century Financial Corporation, a leading subprime mortgage lender, files for Chapter 11 bankruptcy protection.

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 informs investors that it is suspending redemptions from its High-Grade Structured Credit Strategies Enhanced Leverage Fund.

July 11, 2007 - Standard and Poor’s places 612 securities backed by subprime residential mortgages on a credit watch.

July 24, 2007 - Countrywide Financial Corporation warns of  “difficult conditions.”

July 31, 2007 - Bear Stearns liquidates two hedge funds that invested in various types of mortgage-backed securities.

August 6, 2007 - American Home Mortgage Investment Corporation files for Chapter 11 bankruptcy protection.

August 16, 2007 - Fitch Ratings downgrades Countrywide Financial Corporation to BBB+, its third lowest investment-grade rating.

September 14, 2007 - The Chancellor of the Exchequer authorizes the Bank of England to provide liquidity support for Northern Rock, the United Kingdom’s fifth-largest mortgage lender.

October 10, 2007 - U.S. Treasury Secretary Paulson announces the Hope Now initiative, an alliance of investors, servicers, mortgage market participants, and credit and homeowners’ counselors encouraged by the Treasury Department and the Department of Housing and Urban Development.

December 21, 2007 - Citigroup, JPMorgan Chase, and Bank of America abandon plans for a "Master Liquidity Enhancement Conduit," announcing that the fund “is not needed at this time.”

     - from the Federal Reserve Bank of St. Louis (see the complete timeline of the financial crisis from 2007 - 2011 at this link).

 

Financial Crisis Timeline - 2008

January 18, 2008 - Fitch Ratings downgrades Ambac Financial Group’s insurance financial strength rating to AA, Credit Watch Negative. Standard and Poor’s place Ambac’s AAA rating on CreditWatch Negative.

February 13, 2008 - President Bush signs the Economic Stimulus Act of 2008 (Public Law 110-185) into law.

March 5, 2008 - Carlyle Capital Corporation receives a default notice after failing to meet margin calls on its mortgage bond fund.

March 24, 2008 - The Federal Reserve Bank of New York announces that it will provide term financing to facilitate JPMorgan Chase & Co.’s acquisition of Bear Stearns. A limited liability company (Maiden Lane) is formed to control $30 billion of Bear Stearns assets that are pledged as security for the financing.

June 5, 2008 - The Federal Reserve Board announces approval of Bank of America's acquisition of Countrywide Financial Corporation in an all-stock transaction worth approximately $4 billion .

July 11, 2008 - The Office of Thrift Supervision closes IndyMac Bank, F.S.B.

July 30, 2008 - President Bush signs the Housing and Economic Recovery Act of 2008 (Public Law 110-289), which, among other provisions, authorizes the Treasury to purchase government-sponsored enterprise (GSE) obligations and reforms the regulatory supervision of the GSEs under a new Federal Housing Finance Agency.

September 7, 2008 - The Federal Housing Finance Agency (FHFA) places Fannie Mae and Freddie Mac in government conservatorship.

September 15, 2008 - Bank of America announces its intent to purchase Merrill Lynch & Co. for $50 billion.

September 15, 2008 - Lehman Brothers Holdings, Inc., files for Chapter 11 bankruptcy protection.

September 16, 2008 - The Federal Reserve Board authorizes the Federal Reserve Bank of New York to lend up to $85 billion to American International Group (AIG) under Section 13(3) of the Federal Reserve Act.

September 17, 2008 - The SEC announces a temporary emergency ban on short selling in the stocks of all companies in the financial sector.

September 20, 2008 - The U.S. Treasury Department submits draft legislation to Congress for authority to purchase troubled assets.

September 21, 2008 - The Federal Reserve Board approves applications of investment banking companies Goldman Sachs and Morgan Stanley to become bank holding companies.

September 25, 2008 - The Office of Thrift Supervision closes Washington Mutual Bank. JPMorgan Chase acquires the banking operations of Washington Mutual in a transaction facilitated by the FDIC.

October 3, 2008 - President Bush signs the Emergency Economic Stabilization Act of 2008 (Public Law 110-343), which establishes the $700 billion Troubled Asset Relief Program (TARP) authorized to invest up to $250 million in capital in troubled U.S. financial institutions.

October 7, 2008 - The FDIC announces an increase in deposit insurance coverage to $250,000 per depositor as authorized by the Emergency Economic Stabilization Act of 2008.

October 12, 2008 - The Federal Reserve Board approves an application by Wells Fargo & Co. to acquire Wachovia Corporation.

October 14, 2008 - Nine large financial organizations announce their intention to subscribe to TARP, receiving an aggregate amount of $125 billion in taxpayer funding.

October 24, 2008 - PNC Financial Services Group, Inc., purchases National City Corporation, creating the fifth largest U.S. bank.

November 10, 2008 - The Federal Reserve Board approves the applications of American Express and American Express Travel Related Services to become bank holding companies.  The Federal Reserve Board and the U.S. Treasury Department announce a restructuring of the government’s financial support of AIG.

November 11, 2008 - The U.S. Treasury Department announces a new streamlined loan modification program with the cooperation of the Federal Housing Finance Agency (FHFA), Department of Housing and Urban Development, and the HOPE NOW alliance.

November 12, 2008 - U.S. Treasury Secretary Paulson formally announces that the Treasury has decided not to use TARP funds to purchase illiquid mortgage-related assets from financial institutions.

November 17, 2008 - Three large U.S. life insurance companies, Lincoln National, Hartford Financial Services Group, and Genworth Financial, announce their intention to purchase lenders/depositories and thus qualify as savings and loan companies to access TARP funding.

November 18, 2008 - Executives of Ford, General Motors, and Chrysler testify before Congress, requesting access to the TARP for federal loans.

November 20, 2008 - Fannie Mae and Freddie Mac announce that they will suspend mortgage foreclosures until January 2009.

November 23, 2008 - The Treasury Department, Federal Reserve Board, and FDIC jointly announce an agreement with Citigroup to provide a package of guarantees, liquidity access, and capital. Citigroup will issue preferred shares to the Treasury and FDIC in exchange for protection against losses on a pool of commercial and residential securities held by Citigroup.

November 25, 2008 - The Federal Reserve Board announces the creation of the Term Asset-Backed Securities Lending Facility (TALF).

November 25, 2008 - The Federal Reserve Board announces a new program to purchase direct obligations of housing-related government-sponsored enterprises (GSEs)—Fannie Mae, Freddie Mac, and Federal Home Loan Banks.

November 26, 2008 - The Federal Reserve Board announces approval of Bank of America Corporation's acquisition of Merrill Lynch and Company.

December 3, 2008 - The SEC approves measures to increase transparency and accountability at credit rating agencies and thereby ensure that firms provide more meaningful ratings and greater disclosure to investors.

December 11, 2008 - The National Bureau of Economic Research announces that a peak in U.S. economic activity occurred in December 2007 and that the economy has since been in a recession.

December 19, 2008 - The U.S. Treasury Department authorizes loans of up to $13.4 billion for General Motors and $4.0 billion for Chrysler from the TARP.

December 22, 2008 - The Federal Reserve Board approves the application of CIT Group, Inc., an $81 billion financing company, to become a bank holding company. The Board cites “unusual and exigent circumstances affecting the financial markets” for expeditious action on CIT Group’s application.

December 24, 2008 - The Federal Reserve Board approves the applications of GMAC LLC and IB Finance Holding Company, LLC (IBFHC) to become bank holding companies.

December 30, 2008 - The U.S. Securities and Exchange Commission (SEC) releases a report that recommends against the suspension of fair value accounting standards. The report was mandated by the Emergency Economic Stabilization Act of 2008 (EESA).

     - from the Federal Reserve Bank of St. Louis.

 

FINANCIAL CRISIS

 

Financial Crisis Timeline - 2009

January 5, 2009 - The Federal Reserve Bank of New York begins purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.

January 8, 2009 - Moody’s Investor Services issues a report suggesting that Federal Home Loan Banks are facing significant accounting write-downs.

January 9, 2009 - The Congressional Oversight Panel issues its second monthly report on the Troubled Asset Relief Program (TARP).

January 12, 2009 - At the request of President-Elect Obama, President Bush submits a request to Congress for the remaining $350 billion in TARP funding for use by the incoming administration.

January 13, 2009 - The Federal Home Loan Bank of Seattle reports that it will likely suspend its dividend because of a decline in the market value of its mortgage-backed securities portfolio. The move follows a similar announcement on January 8 by the Federal Home Loan Bank of San Francisco.

January 16, 2009 - The U.S. Treasury Department, Federal Reserve, and FDIC announce a package of guarantees, liquidity access, and capital for Bank of America. The Treasury Department also announces that it will lend $1.5 billion from the TARP to Chrysler Financial to finance the extension of new consumer auto loans.

February 17, 2009 - President Obama signs the "American Recovery and Reinvestment Act of 2009," which includes a variety of spending measures and tax cuts intended to promote economic recovery.

February 18, 2009 - President Obama announces The Homeowner Affordability and Stability Plan.  The plan includes a program to permit the refinancing of conforming home mortgages owned or guaranteed by Fannie Mae or Freddie Mac that currently exceed 80 percent of the value of the underlying home.

February 23, 2009 - The U.S. Treasury Department, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Federal Reserve Board issue a joint statement that the U.S. government stands firmly behind the banking system, and that the government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. 

February 25, 2009 - The Federal Reserve Board, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and Office of Thrift Supervision announce that they will conduct economic assessments or "stress tests" of U.S. bank holding companies with assets exceeding $100 billion, to estimate the range of possible future losses.

February 26, 2009 - The FDIC announces that the number of "problem banks" increased from 171 institutions with $116 billion of assets at the end of the third quarter of 2008, to 252 insured institutions with $159 billion in assets at the end of the fourth quarter of 2008. The FDIC also announces that there were 25 bank failures and five assistance transactions in 2008, the largest annual number since 1993.

February 26, 2009 - Fannie Mae reports a loss of $25.2 billion in the fourth quarter of 2008, and a full year 2008 loss of $58.7 billion.

March 4, 2009 - The U.S. Treasury Department announces guidelines to enable servicers to begin modifications of eligible mortgages under the Homeowner Affordability and Stability Plan.

March 11, 2009 - Freddie Mac announces that it had a net loss of $23.9 billion in the fourth quarter of 2008, and a net loss of $50.1 billion for 2008 as a whole.

March 19, 2009 - The U.S. Department of the Treasury announces an Auto Supplier Support Program that will provide up to $5 billion in financing to the automotive industry.

March 19, 2009 - The FDIC completes the sale of IndyMac Federal Bank to OneWest Bank.

March 26, 2009 - The U.S. Treasury Department outlines a framework for comprehensive regulatory reform that focuses on containing systemic risks in the financial system.

 May 7, 2009 - The Federal Reserve releases the results of the Supervisory Capital Assessment Program ("stress test") of the 19 largest U.S. bank holding companies. The assessment finds that the 19 firms could lose $600 billion during 2009 and 2010 if the economy were to track the more adverse scenario considered in the program.

May 8, 2009 - Fannie Mae reports a loss of $23.2 billion for the first quarter of 2009.

May 12, 2009 - Freddie Mac reports a first quarter 2009 loss of $9.9 billion, and a net worth deficit of $6.0 billion as of March 31, 2009.

May 20, 2009 - President Obama signs the Helping Families Save Their Homes Act of 2009 (Public Law 111-22), which temporarily raises FDIC deposit insurance coverage from $100,000 per depositor to $250,000 per depositor.

May 27, 2009 - The FDIC announces that the number of "problem banks" increased from 252 insured institutions with $159 billion in assets at the end of fourth quarter of 2008, to 305 institutions with $220 billion of assets at the end of the first quarter of 2009. There were 21 bank failures in the first quarter of 2009, the largest number of failed institutions in a quarter since the first quarter of 1992.

June 1, 2009 - General Motors Corporation and three domestic subsidiaries announce that they have filed for relief under Chapter 11 of the U.S. Bankruptcy Code.

June 30, 2009 - The U.S. Treasury proposes creation of a new Consumer Financial Protection Agency. The proposed bill would transfer all current consumer protection functions of the Federal Reserve System, Comptroller of the Currency, Office of Thrift Supervision, FDIC, FTC, and the National Credit Union Administration to the new agency.

July 15, 2009 - Congress announces the appointment of members to the Financial Crisis Inquiry Commission, established by the Fraud Enforcement and Recovery Act of 2009 (Public Law 111-21). The Commission is required to report its findings on the causes of the financial crisis to Congress by December 15, 2010.

July 23, 2009 - The Federal Reserve Board proposes significant changes to Regulation Z (Truth in Lending) intended to improve the disclosures consumers receive in connection with closed-end mortgages and home-equity lines of credit.

August 6, 2009 - Fannie Mae reports a loss of $14.8 billion in the second quarter of 2009.

August 25, 2009 - President Obama nominates Ben S. Bernanke for a second term as Chairman of the Board of Governors of the Federal Reserve System.

August 27, 2009 - The FDIC announces that the number of "problem banks" increased from 305 insured institutions at the end of first quarter of 2009 to 416 institutions at the end of the second quarter of 2009.

October 14, 2009 - The Dow Jones Industrial Average closes above 10,000 for the first time since October 3, 2008.

October 22, 2009 - The Special Master for TARP Executive Compensation releases determinations on the compensation packages for the top 25 most highly paid executives at the seven firms that received exceptional TARP assistance (AIG, Citigroup, Bank of America, Chrysler, Chrysler Financial, GM, and GMAC).

November 1, 2009 - CIT Group, Inc., files for bankruptcy protection under Chapter 11 of the bankruptcy code. The U.S. Government purchased $2.3 billion of CIT preferred stock in December 2008 under the Troubled Asset Relief Program (TARP), but the firm's bankruptcy is expected to wipe out the equity stakes of CIT's current shareholders, including the Government.

November 5, 2009 - Fannie Mae reports a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009.

December 2, 2009 - Bank of America announces that it will repurchase the entire $45 billion of cumulative preferred stock issued to the U.S. Treasury under the Troubled Asset Relief Program (TARP) after the completion of a securities offering.

December 14, 2009 - Citigroup announces that it has reached an agreement with the U.S. Government to repay the remaining $20 billion in TARP trust preferred securities issued to the U.S. Treasury.

December 14, 2009 - Wells Fargo and Company announces that it will redeem the $25 billion of preferred stock issued to the U.S. Treasury under the TARP, upon successful completion of a $10.4 billion common stock offering.

     -from the Federal Reserve Bank of St. Louis.

 

Financial Crisis Timeline - 2010

January 13, 2010 - The Financial Crisis Inquiry Commission (FCIC), created by the Fraud Enforcement and Recovery Act of 2009, holds its first public hearing in Washington, D.C.

January 21, 2010 - President Obama proposes new restrictions on the trading activities and market shares of commercial banks. Specifically, he calls for prohibiting banks from owning, investing in or sponsoring hedge funds, private equity funds, or proprietary trading operations for their own profit. He also calls for broader market share limits on commercial banks.

February 1, 2010 - The Commercial Paper Funding Facility, Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Primary Dealer Credit Facility, and Term Securities Lending Facility programs expire.

February 23, 2010 - The FDIC announces that the number of "problem banks" increased from 552 insured institutions with $345.9 billion in assets at the end of third quarter of 2009, to 702 institutions with $402.8 billion of assets at the end of the fourth quarter of 2009.

February 24, 2010 - Freddie Mac reports a net loss of $6.5 billion in the fourth quarter of 2009 and a full-year 2009 net loss of $21.6 billion, compared with a $50.1 billion net loss in 2008.

February 26, 2010 - Fannie Mae reports a net loss of $15.2 billion in the fourth quarter of 2009 and a full-year 2009 loss of $72.0 billion. The fourth quarter loss resulted in a net worth deficit of $15.3 billion as of December 31, 2009.

March 31, 2010 - The Federal Reserve Bank of New York releases additional information on the Maiden Lane limited liability companies formed to facilitate the merger between JPMorgan Chase and Bear Stearns (Maiden Lane I) and the government's financial support of AIG (Maiden Lane II and III).

May 9, 2010 - The International Monetary Fund (IMF) approves a three-year SDR 26.4 billion (€30 billion) Stand-By Arrangement for Greece, with $4.8 billion (about €5.5 billion) made available immediately as part of joint financing with the European Union, for a combined €20.0 billion in immediate financial support.

May 10, 2010 - The Council of the European Union and the Member States decides on a comprehensive package of measures to preserve financial stability in Europe, including a European Financial Stabilisation mechanism with a total volume of up to EUR 500 billion, with terms similar to those offered by the IMF.

May 28, 2010 - The Congressional Budget Office releases a study describing the various actions by the Federal Reserve to stabilize financial markets since 2007 and how those actions are likely to affect the federal budget in coming years. The report also presents estimates of the risk-adjusted (or fair value) subsidies that the Federal Reserve provided to financial institutions through its emergency programs.

June 11, 2010 - U.S. Department of the Treasury announces that TARP repayments to taxpayers have, for the first time, surpassed the total amount of TARP funds outstanding. The report shows that, through the end of the May, TARP repayments had reached a total of $194 billion, which exceeded the total amount of TARP funds outstanding ($190 billion) by $4 billion.

June 16, 2010 - Freddie Mac announces that the company has notified the New York Stock Exchange (NYSE) of its intent to delist its common stock and the 20 listed classes of its preferred stock.

July 21, 2010 -  President Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) into law. 

October 1, 2010 - Freddie Mac reports that there may have been affidavits improperly executed in connection with foreclosures. The alleged practices are not in compliance with Freddie Mac's guidelines and directives to its loan servicers.

October 1, 2010 -The Financial Stability Oversight Council holds its inaugural meeting. The council consists of nine members and its main purpose is to identify risk in the United States financial system.

October 5, 2010 - A "Two-year Retrospective" report on TARP is released by the Treasury Department. The report provides a comprehensive overview of the steps that Treasury took under TARP to contain the growing financial panic in the United States in late 2008 and early 2009.

November 22, 2010 - EU/IMF authorities unanimously agree to a three year joint financial assistance programme for Ireland.

November 23, 2010 - The U.S. Department of the Treasury announces that with the delivery of $11.7 billion in proceeds from the initial public offering (IPO) of General Motors (GM), the total amount of Troubled Asset Relief Program (TARP) funds returned to taxpayers now exceeds $250 billion.

December 1, 2010 - The Federal Reserve Board issues a press release with detailed information about more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis, to restore the flow of credit to households and firms, and to support economic recovery and job creation in the aftermath of the crisis.

     -from the Federal Reserve Bank of St. Louis.

 

Financial Crisis Timeline - 2011

January 14, 2011 - The Federal Reserve Bank of New York announces the termination of its assistance to American International Group, Inc. (AIG) and the full repayment of its loans to AIG.

January 27, 2011 - The Financial Crisis Inquiry Commission releases its final report on the causes of the financial and economic crisis in the United States.

February 10, 2011 - The Financial Crisis Inquiry Commission releases audio files and transcripts of interviews, and other documents and data compiled by the Commission in the course of its inquiry into the causes of the financial crisis.

February 11, 2011 - The U.S. Treasury Department and the Department of Housing and Urban Development release their report to Congress on Reforming America's Housing Finance Market.

March 18, 2011 - The Federal Reserve releases the Comprehensive Capital Analysis and Review (CCAR) of the 19 largest U.S. bank holding companies. Sometimes referred to as "stress tests," the CCAR is designed to measure capital adequacy plans of the largest financial institutions under different economic scenarios. As a result of the CCAR, some firms are expected to increase or restart dividend payments, buy back shares, or repay government capital.

March 21, 2011 - The U.S. Department of the Treasury announces that it intends to sell its remaining portfolio, $142 billion, of agency-guaranteed mortgage-backed securities (MBS). These MBS were originally purchased under the authority provided by the Housing and Economic Recovery Act of 2008. The Treasury said that it will sell up to $10 billion of MBS per month, subject to market conditions.

April 13, 2011 - The U.S. Senate Permanent Subcommittee on Investigations releases its final report on its inquiry into key causes of the financial crisis.

     -from the Federal Reserve Bank of St. Louis.

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