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Fri12152017

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Global Financial Crisis

Here is the series of major events that took place since 2007 in reverse chronological order:

  1. 20 March 09 - FirstCity, Georgia-based bank, Colorado National Bank baased in Colorado Springs and Herring Bank based in Texas were closed by regulator bringing the number of bank failures this year to 20.
  2. 18 March 09 - Ben Bernanke launched an unexpected $1.2 trillion cash to revive economy.  $300 billion will use to buy long-term government bonds over the next 6-month and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.
  3. 6 March 09 - Georgia bank, Lavonia-based Northeast Bank, was closed by regulator making 17th bank failure of the year and 42nd of the recession!
  4. 27 Feb 09 - US takes 36% stake in Citi, partially nationalised Citibank!
  5. 13 Feb 09 - Sherman County Bank (Loup City), Riverside Bank of the Gulf Coast (Cape Coral), Corn Belt Bank and Trust Company (Pittsfield) and Pinnacle Bank (Beaverton) were closed by regulators, bringing the number of US bank failures for 2009 to 13 and 38 since the start of the credit crisis.
  6. 30 Jan 09 - Utah MagnetBank, Marland-based Suburban Federal Savings Bank, and Florida's Ocala National Bank are shut down by FDIC, making a total of 29 banks failed since the start of the credit crisis. In addition, US GDP decline at 3.8%, worst since 1982.
  7. 16 Jan 09 – National Bank of Commerce is shut down by FDIC.  The 26th bank to fail since the start of the credit crisis.
  8. 15 Jan 09 – Bank of America needs another $20bn emergency cash to cope with Merrill Lynch losses.  This is in addition to existing $118bn committed by Feds earlier, making a total of $138bn lifeline!
  9. 16 Dec 08 – Fed cuts interest rate to near zero, 0.25% to be precise.
  10. 11 Dec 08 – Madoff scandal
  11. 1 Dec 08 – US officially in recession.  National Bureau of Economic Research (NBER) concluded that US has been in recession since December last year.  The last time the US was in a recession was in 2001, and this would make it the longest contraction since 1982.  If the recession lasts for five more months, it will become the most lengthy since the Great Depression.  Other economies officially in recession are Singapore, Hong Kong, Japan, New Zealand, Ireland, Italy, Germany and Britain.  The euro region and Japan both fell into a slump in the second quarter of this year, making it the first simultaneous recession in all three regions in the post-war era.
  12. 27 Oct 08 – Bloody October.  According to Standard & Poor’s Index Services, world equity markets registered their worst month in history – with an estimated lost of $5.79 trillion.
  13. 3 Oct 08 - Enhanced bailout plan pass through the Congress but market fall 1.5% for Dow, 1.48% for Nasdaq and 1.35% for S&P 500.
  14. 29 Sept 08 - Bailout plan did not pass through the Congress.  Dow plunged 6.98%, Nasdaq 9.14% and S&P 500 8.79%, worst one-day fall since the 1987 crash.  Citigroup to buy Wachovia at $2.2 billion in stock.  Wachovia is the 6th largest bank with $600 billion of deposits.
  15. 26 Sept 08 - Washington Mutual (WaMu) taken over by JP Morgan. WaMu was the 2nd biggest provider of option ARMs, behind Wachovia, with $182 billion of deposits.
  16. 21 Sept 08 - US approved Goldman Sachs and Morgan Stanley to become Bank Holdings Company, this implied Wall Street is now 'Main Street'.  There will be no more independent banking companies in US.
  17. 19 Sept 08 - US authorities moved towards agreement on a programme of government to take over debt instruments linked to bad home loans.  The 'rescue' plan cost $700 bn.  US impose ban on short-selling the financial stocks till 2 Oct 2008.
  18. financial_crisis18 Sept 08 - Morgan Stanley eyes merger with Wachovia, Washington Mutual is up for sale and British Bank Lloyds buys HBOS.  Top central banks pump an extra of $180 bn into money markets to try keep credit flowing.  UK ban on short-selling of financial stocks.
  19. 17 Sept 08 - AIG bail out by Fed with $85 bn loan and of stake of about 80%.
  20. 15 Sept 08 - Lehman Brothers, 158-year old the 4th largest US brokerage firm, with total debts of $613 billion filed for Chapter 11, Merrill Lynch, the 3rd largest US investment bank, is sold to Bank of America for $50 billion at $29 a share; AIG seeks $40 billion loan from Fed help.
  21. 7 Sept 08 - Fannie Mae and Freddie Mac, which back about half of all US mortgages, nationalised with $100 bn each.
  22. 13 July 08 – oil hits almost $147.
  23. 11 July 08 - IndyMac, the largest savings and loan association in Los Angeles and the 7th largest mortgage originator in the US, failed.
  24. July 08 - Federal Reserve announced to start lending to Fannie and Freddie in a bail-out.
  25. 16 Mar 08 - Bear Stearns, the 5th largest US investment bank, was sold to Morgan Stanley.
  26. 2 Jan 08 – Asian stock markets were battered.  Traders blamed it on hedge funds trimming their positions across the region and intensifying fears of a US economic recession.  A day later, the Fed announced a huge interest cut to try to stop the global rout.
  27. Aug 07 - on 1 August, 2 Bear Stearns Hedge Funds declare Chapter 11, 6 Aug - American Home Mortgage Files Chapter 11, 16 Aug, Emergency rate cut by the Fed, followed by the sale of Countrywide Financial, a huge mortgage lender, to Bank of America.  Subprime found in Bank portfolios around world.

The biggest US investment bank is Goldman Sachs and Morgan Stanley is the 2nd largest US investment bank.

Source:

  1. Ari Levy and Elizabeth Hester, Bloomberg, "JPMorgan Buys WaMu Deposits; Regulators Seize Thrift", 20080926
  2. Krishna Guha, FT, "Global Markets Roar In approval", 20080919
  3. John Authers, FT, "Weekend could be a long time", 20080912
  4. Michelle Donley, MarketWatch, "MarketWatch's top stories of the week", 20080919
  5. Alvin Foo, Straits Times, “10 days that shook 2008”, 20081227
  6. Sundeep Tucker, FT, “Bank of America gets $138bn lifeline”, 20090116