The University of Iowa Center For International Finance & Development

CREDIT CRISIS TIMELINE[*]
THE UNIVERSITY OF IOWA CENTER FOR INTERNATIONAL FINANCE & DEVELOPMENT

PREPARED BY JASON COX AND LAURIE GLAPA
Last updated: July 1, 2009
• June 2003:
o Greenspan lowers Fed’s key rate to 1%, the lowest in 45 years

http://www.bloomberg.com/apps/news?pid=20601087&sid=aclMlgBb3taQ&refer=home
• 2006:
o Lenders make $640 billion in subprime loans

o 20% of all mortgage lending was subprime
http://money.cnn.com/2007/04/02/news/companies/new_century_bankruptcy/
• May 5, 2006:
o In possibly the first casualty of the looming subprime crisis, Kirkland, Washington based Merit Financial Inc. files for bankruptcy and
closes its doors, firing all but 80 of its 410 employees, kept to wind down the business.
o Chief financial officer, Ryan Kidd, said that Merit’s marketplace had declined about 40% and sales were not bringing in enough
revenue to support the overhead of running the company.
http://seattlepi.nwsource.com/business/269154_merit05.html
• August 26, 2006:
o Defaults on subprime mortgages start to occur much earlier in the mortgage process.
o Investors and analysts believe this trend could be the result of lax underwriting quality or a sign of a weakening mortgage credit market.
http://www.facorelogic.com/uploadedFiles/Newsroom/RES_in_the_News/Subprime_Mortgage_Lenders_Seeing_Early_Payment_Defaults.pdf
• January 3, 2007:
o Ownit Mortgage Solutions Inc. files for Chapter 11.

o Owed Merrill Lynch around $93 million when filing.
http://www.californiabankruptcylawyerblog.com/2007/01/californiabased_ownit_mortgage.html
• February 5, 2007:
o Mortgage Lenders Network USA Inc. files for Chapter 11.

o 15th largest subprime lender with $3.3 billion in loans funded in third quarter 2006.
http://www.boston.com/news/local/connecticut/articles/2007/02/05/mortgage_lenders_network_files_for_ch_11_bankruptcy_protection/
o HSBC, a large London based bank, issues a warning that an earlier statement about its Mortgage Services operations will be much
worse than current market estimates.
o HSBS blames this drop on the increased delinquencies of US subprime mortgages and the inability to refinance because of falling equity
prices.
o The release said that the aggregate loan impairment charges and credit risk provisions could be 20% higher than the earlier statement.
http://www.hsbc.com/1/2/newsroom/news/news-archive-2007/hsbc-trading-update-us-mortgage-services
o The Group of Seven Finance Ministers meet in Essen, Germany to discuss worldwide financial problems.
o One of the main concerns is the lack of regulation of hedge funds. Germany says this could be a source of systematic risk for the
financial system where the US believed market discipline is the best way to address the issue.
o Henry Paulson noted that the US residential housing market had been cooling over the last year but appears to have stabilized.
http://www.ft.com/cms/s/0/3db4a4e4-b650-11db-9eea-0000779e2340.html
http://www.ustreas.gov/press/releases/hp255.htm

o ResMae Mortgage Corp. files for Chapter 11.
o Credit Suisse Group buys $19.1 million in assets in auction.
o ResMae made $7.7 billion in subprime loans in 2006 making it 26th in subprime lending.
http://www.bloomberg.com/apps/news?pid=20601087&sid=arsKNQcbPcxc&refer=home
• March 2007:
o New Century Financial announces it will stop making loans and needs emergency financing to survive.
o Stock price goes from $15 at the beginning of March to $3.21 when announcement is made.
http://www.nytimes.com/2007/03/11/business/11mortgage.html?pagewanted=3&_r=1
• March 20, 2007:
o People’s Choice Home Loan files for Chapter 11.

http://www.bloomberg.com/apps/news?pid=20601087&sid=atkiRNcdlZ8M&refer=home
• April 3, 2007:
o New Century Financial files for Chapter 11.

o Cuts 54% of its workforce or 3,200 jobs
o Largest subprime lender in US.
o Delisted from the NYSE
o Defaults on $8.4 billion in loan repayments
o New Century made $51.6 billion in subprime loans in 2006 making it 2 nd in subprime lending
http://money.cnn.com/2007/04/02/news/companies/new_century_bankruptcy/
• April 12, 2007:
o SouthStar Funding LLC files for Chapter 7.

o Another subprime lender
http://www.reuters.com/article/gc06/idUSN1236927220070412
• June 7, 2007:
o In a letter to investors, Bear Stearns suspends redemption rights for a hedge fund heavily invested in the subprime debt market because
of liquidity problems.
o The fund had lost 23% of its value since January 2007 including almost 19% in April alone.
http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_748264.htm
• June 22, 2007:
o Bear Stearns agrees to a plan to loan $3.2 billion to one of its hedge funds.
o The lack of liquidity at the hedge fund is blamed on the bad bets that were placed on the US subprime mortgage market.
http://www.ft.com/cms/s/0/d7936764-f1d5-11dc-9b45-0000779fd2ac.html
• June 27, 2007:
o SEC Chairman, Christopher Cox, testifies to Congress that the SEC has opened 12 enforcement investigations into collateralized debt
obligation (CDO) practices.
o This was in response to questions from Congress about the transparency of CDOs
http://www.reuters.com/article/bondsNews/idUSWAT00779720070626
http://www1.cchwallstreet.com/ws-portal/content/news/container.jsp?fn=07-02-07
• July 6, 2007:
o UBS fires CEO and the heir apparent for chairman of the board, Peter Wuffi.
http://www.ft.com/cms/s/0/e29e2376-2b59-11dc-85f9-000b5df10621.html
• July 9, 2007:
o Credit Suisse releases a report that shows CDO losses could total up to $52 billion.
o The report stated that CDO investors will likely be in trouble but they do not predict any systematic risk.
o Ivan Vatchkov, a Credit Suisse analyst, said that “[b]anks’ direct exposure to CDOs is not as high as people think.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPKIHSk5cS50&refer=home
• July 10, 2007:
o The Federal Reserve reports that consumer credit debt rose at an annual rate of 6.4%, the biggest jump in six months.
o This was close to double what analysts were expecting.
http://query.nytimes.com/gst/fullpage.html?res=9E02E3D7103EF933A25754C0A9619C8B63
• July 16, 2007:
o Alliance Bankcorp files for Chapter 7.

o Ceased operations on July 13, 2007.
o Lent to category of borrowers between subprime and prime.
http://www.reuters.com/article/bondsNews/idUSN1625754520070716
• July 17, 2007:
o In a letter sent to investors, two Bear Stearns hedge funds specializing in subprime debt announce that each fund has lost at least 90% of
its value.
o Bear Stearns declined to provide more liquidity following the $3.2 billion given as a bailout in June 2007 to cover margin calls.
o The total of investor contributions to the funds was around $1.6 billion.
o AAA tranches of subprime debt were the only rating investing in by the funds.
http://www.investopedia.com/articles/07/bear-stearns-collapse.asp?viewall=1
• July 18, 2007:
o Ben Bernanke, chairman of the Federal Reserve, says the Fed has reduced its growth forecast for 2007 based on continuing problems in
the housing market.
o The Fed still predicts moderate growth for the rest of 2007 with the economy expanding at a 2.5% to 2.75% rate, 0.5% lower than
earlier estimates.
o Mr. Bernanke also acknowledged that the Fed and other regulators had been too timid in reigning in aggressive mortgage lenders.
o The Fed also announced plans to review the practices of mortgage lenders to see if new rules or enforcement are necessary.
o Bernanke estimates that the fallout of the US subprime crisis could cost up to $100 billion.
http://www.nytimes.com/2007/07/19/business/19fed.html
• July 24, 2007:
o Countrywide Financial announces that second quarter profits were down 33%.
o They also mentioned that the problems with subprime mortgages were starting to spread to conventional home loans.
o Subprime delinquencies along with a doubling of delinquencies on prime mortgages were blamed for the drop.
http://www.ft.com/cms/s/0/e2ab1b62-3a13-11dc-9d73-0000779fd2ac.html
• July 31, 2007:
o The two Bear Sterns hedge funds that had released losses on July 17 filed for Chapter 15 bankruptcy.
o Bear Stearns wound down the funds and liquidated all of the holdings in the funds.
o One commentator called it the worse thing that had ever happened to Bear Stearns.
http://www.investopedia.com/articles/07/bear-stearns-collapse.asp?viewall=1
• August 1, 2007:
o The first civil lawsuits are filed against Bear Sterns for the collapse of 2 hedge funds invested in subprime debt.
o The two complaints charged Bear Stearns with misleading statements about the fund’s exposure to subprime debt.
http://www.usatoday.com/money/economy/2007-08-01-4138637345_x.htm
• August 3, 2007:
o A German government-led bailout of IKB Deutsche Industriebank results in state-owned KfW assuming up to €1 billion in expected
possible losses.
o KfW and other banks agreed to guarantee a liquidity line of up to €8.1 billion to cover the loss in value of the bank’s subprime US
investments.
http://www.ft.com/cms/s/0/3dd8cbf4-41e6-11dc-8328-0000779fd2ac.html
• August 6, 2007:
o Bear Stearns fires their co-president, Warren Spector, allegedly for being outspoken about the error in exposing the hedge funds to
subprime debt.
o Spector had worked at Bear Sterns for 24 years and was deemed by many to be the heir apparent to the CEO job.
o The presidential duties that Spector did were assigned to his co-president, Alan Schwartz.
http://www.nytimes.com/2007/08/06/business/06bear.html?_r=1&oref=slogin
• August 7, 2007:
o American Home Mortgage files for Chapter 11.

o Laid off over 6,000 workers.
o 10th largest US retail mortgage lender in 2006.
o Catered to people considered good credit risks, not subprime.
http://www.usatoday.com/money/economy/housing/2007-08-06-american-home-mortgage-bankruptcy_N.htm
• August 9, 2007:
o France’s biggest bank, BNP Paribas SA, froze assets on three investment funds that had capital of 1.6 billion Euros.
o The funds had declined almost 20% in two weeks and the bank froze withdrawals because they couldn’t fairly value their assets because
of the turmoil and their exposure to the US subprime market.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aUIoRzrktg4M&refer=home
o The European Central Bank injects €95 billion into the Eurozone banking system.
o This is the largest such intervention in over-night rates by the ECB since September 11, 2001.
http://www.ft.com/cms/s/1/e0af0b50-46bd-11dc-a3be-0000779fd2ac.html
• August 10, 2007:
o HomeBanc files for Chapter 11.

o Sold 5 retail branches to Countrywide Financial 2 days before filing bankruptcy.
http://www.usatoday.com/money/economy/housing/2007-08-10-homebanc_N.htm
http://www.reuters.com/article/bankingfinancial-SP/idUSN1028519720070813?pageNumber=2&virtualBrandChannel=0
o Central banks in Europe, Asia, and the Americas inject $300 billion over 2 days to prevent a credit market seizure.
o The Fed contributed $38 billion into the banking system and stated that it would provide funds as necessary to keep the financial system
functioning smoothly.
o The European Central bank injected over €150 billion into their markets attempting to steady the Eurozone credit markets.
http://www.reuters.com/article/ousiv/idUSL1019586620070810?sp=true
• August 16, 2007:
o Countrywide Financial Group borrows $11.5 billion from banks to stave off bankruptcy.
o Lost more than half its stock value in 2007.
o Announced 90% of new loans would meet Fannie Mae and Freddie Mac standards.
o Fitch drops Countrywide to BBB+ and Moody’s drops to Baa3.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ax4Hih1unXTs
• August 17, 2007:
o Bear Stearns cuts 240 jobs in the mortgage origination department.

o This is followed by another cut of 310 positions in early October.
http://www.ft.com/cms/s/0/d7936764-f1d5-11dc-9b45-0000779fd2ac.html
• August 24, 2007:
o Bank of America buys $2 billion in preferred shares of Countrywide Financial in an attempt to restore investor confidence.
o This resulted in a 16% ownership share and also an opportunity for BofA to match any buy-out offers (written into the contract).
http://www.ft.com/cms/s/0/d47be632-51d5-11dc-8779-0000779fd2ac.html
• August 26, 2007:
o Landesbank Baden-Württemberg (LBBW), the German public sector bank, agrees to buy Sachsen Landesbank for €250 million.
o Sachsen LB is the second German bank that needed to be bailed out because it was not big enough for large exposures to volatile credit
markets.
http://www.ft.com/cms/s/0/5732607e-53d4-11dc-9a6e-0000779fd2ac.html
• August 28, 2007:
o The National Association of Realtors (NAR) reports that the supply of unsold homes in the US was at its highest in sixteen years in
July.
o The NAR blamed the slowdown on mortgage liquidity issues and analysts predicted that the worse is yet to come since most of the July
deals were already entered into before the severe credit tightening occurred in July and August.
http://www.ft.com/cms/s/0/454ec98a-54fe-11dc-890c-0000779fd2ac.html
• September 14, 2007:
o The Bank of England extends emergency funding to Northern Rock, a large British mortgage lender.
o The move came after investors withdrew support of Northern Rock amid worries that the institution could face short term difficulties in
raising the needed capital in the wholesale market.
o The Bank of England extending the needed liquidity likely means that Northern Rock will lose its independence and there are already
rumors about a larger bank purchasing it.
http://www.ft.com/cms/s/0/c6de12c8-6258-11dc-bdf6-0000779fd2ac.html
o Bear Stearns announces a 61% drop in earnings from the same quarter in 2006.
o On the same day, Goldman Sachs reported a 79% rise in third quarter profits beating analyst expectations.
http://www.ft.com/cms/s/0/83965b0a-67db-11dc-8906-0000779fd2ac.html
o The Bank of England announces an auction of £10 billion of emergency three-month funds at 6.75% and agrees to accept mortgages
from banks as collateral.
o This was an attempt to provide the much needed liquidity to the banking system in England but they received no bids.
http://www.ft.com/cms/s/0/0a7c1f86-6c5c-11dc-a0cf-0000779fd2ac.html
• October 1, 2007:
o UBS announces a $3.7 billion write down.

o After the announcement, the chief executive of its investment banking division, Huw Jenkins was replaced.
http://www.ft.com/cms/s/0/d3b47dce-71f4-11dc-8960-0000779fd2ac.html
• October 3, 2007:
o Morgan Stanley cuts 600 jobs.

o This amounted to 1% of its workforce.
http://www.foxnews.com/story/0,2933,299140,00.html
• October 11, 2007:
o Treasury Secretary, Henry Paulson, spearheads a drive to mitigate the subprime mortgage crisis by bringing together investors, bond
issuers, mortgage service companies, and consumer counseling services to “step up efforts to prevent foreclosures for as many families
as possible.”
o Record levels of foreclosures are expected to worsen as the adjustable-rate mortgages (ARMs) reset to higher interest rates.
o There are currently $350 billion in ARMs in the US marketplace.
o Mr. Paulson stressed that we have not solved the problem but rather taken an important step “towards a necessary goal.”
http://www.ft.com/cms/s/0/937aee76-7796-11dc-9de8-0000779fd2ac.html
o RealtyTrac, which keeps housing data, releases a report that says foreclosures in the US housing market have doubled in September
compared to the same time last year.
o The number of foreclosures is actually down 8% from August.
o Las Vegas was the hardest hit US city with one in every 185 households being foreclosed.
http://www.ft.com/cms/s/0/88747b04-781e-11dc-8e4c-0000779fd2ac.html
• October 16, 2007:
o Citigroup’s profits drop 57% from the same quarter last year.
o Write downs linked to subprime mortgages, which totaled over $3 billion, are blamed for the drop.
o This drop was slightly better news then analysts expected.
http://www.ft.com/cms/s/0/7a71478c-7b82-11dc-8c53-0000779fd2ac.html
• October 17, 2007:
o Morgan Stanley cuts another 300 bankers in its credit trading, structured products, and leveraged lending areas.
o This resulted from a worldwide freeze in activities in the global credit markets.
http://www.marketwatch.com/news/story/morgan-stanley-lays-off-about/story.aspx?guid=%7BB2A24D74-FDB5-4DE8-85BF-
840D7D89C917%7D
• October 23, 2007:
o Countrywide Financial announces plans to spend $16 billion in refinancing subprime loans for at risk borrowers.
o Countrywide said this plan could help around 82,000 borrowers with ARMs.
http://www.ft.com/cms/s/0/8580f4b4-8173-11dc-a351-0000779fd2ac.html
• October 25, 2007:
o Merrill Lynch announces a $2.24 billion loss in the third quarter.

o This was mainly from the $7.9 billion in write downs on CDOs and subprime mortgages.
http://www.ft.com/cms/s/0/8ecb1118-81f9-11dc-8a8f-0000779fd2ac.html
• October 26, 2007:
o Countrywide Financial reports first loss in 25 years, third quarter loss of $1.2 billion on about $1 billion in write downs.
http://www.ft.com/cms/s/0/142ca5a2-833e-11dc-b042-0000779fd2ac.html
• October 31, 2007:
o Merrill Lynch (ML) CEO, Stan O’Neal, resigns after an announcement that ML would write down around $7.9 billion debt caused by
their exposure to the subprime mortgage market.
o The $7.9 billion is $3.4 billion more than ML had predicted just three weeks earlier and is the largest write down in the credit crisis so
far.
o O’Neal is offered $160 million payout from ML to leave.
http://articles.latimes.com/2007/oct/31/business/fi-merrill31
• November 5, 2007:
o Citigroup CEO, Chuck Prince, resigns after an announcement that Citigroup may have to write down up to $11 billion in bad debt from
losses in the subprime mortgage crisis.
o Former US Treasury Secretary, Robert Rubin, is named as chairman of the bank and Citi Europe Chairman, Win Bischoff, is named
interim CEO.
http://articles.moneycentral.msn.com/Investing/Dispatch/CitiFacesHugeWriteDown.aspx
o Three major US banks, Citigroup, Bank of America, and JP Morgan Chase, agree to a plan that will buy $75 billion of weak debt.
o This scheme will hopefully inject liquidity into the market and dissuade investors from dumping more investments, worsening the credit
market.
o The $75 billion fund will act as a purchaser of last resort for failing assets.
http://news.bbc.co.uk/2/hi/business/7090339.stm
o Bank of America says it will have to write off $3 billion of bad debt.
o The bank also said it will spend $600 million supporting some of its funds because of possible liquidity problems.
o Barclays confirms a $1.6 billion write down in the month of October on their subprime holdings.
o The bank also released that more than £5 billion in exposure to subprime loan packages could lead to more write downs in the future.
o The House of Representatives passes a predatory lending bill imposing liability on companies that securitize mortgages.
o The bill had four main components: 1) a licensing system for residential mortgage originators, 2) a minimum standards that borrowers
have the ability to repay the loan, 3) an anti-steering component that would prohibit originators from steering consumers to a predatory
loan, and 4) create another licensing system for mortgage brokers.
o The Mortgage Bankers Association opposed the bill because they thought it would limit credit availability and options for the
consumer.
http://www.ft.com/cms/s/0/074f2b04-93f4-11dc-acd0-0000779fd2ac.html
o Jan Hatzius, chief economist for Goldman Sachs, believes the total losses from the US subprime crisis could hit $400 billion.
o Mr. Hatzius said that if this figure is reached, the macroeconomic consequences could be very dramatic.
o Freddie Mac announces a $2 billion loss in mortgage defaults and credit losses.
o Shares in Freddie Mac dropped 28.7% and Fannie Mae dropped 24.8% upon the announcement.
o Freddie Mac complained that capital restraints could force it to raise more capital to satisfy liquidity problems.
o To cover bad loans between July and September, Freddie Mac said it had set aside $1.2 billion.
http://www.ft.com/cms/s/0/6b48d03c-97d3-11dc-9e08-0000779fd2ac.html
o Two French banks pledge $1.5 billion to bailout French bond insurer CIFG.
o Credit rating agencies had warned that CIFG may lose its AAA rating if it did not increase its capital cushion.
http://www.ft.com/cms/s/0/2160f3ce-9967-11dc-bb45-0000779fd2ac.html
o Citigroup raises $7.5 billion from Abu Dhabi government.

o These convertible securities that carried an 11% coupon were purchased by the Abu Dhabi Investment Authority.
http://www.ft.com/cms/s/0/df7865c2-9d54-11dc-af03-0000779fd2ac.html
o Freddie Mac announces a $6 billion share issue to cover more losses from mortgages.
o In addition, Freddie Mac said it would cut its dividend by 50% in the fourth quarter to attempt to shore up its capital.
o KfW, a German state-owned bank, doubled its balance sheet risk provisions from their bailout of IKB to €4.8 billion in expected losses.
o KfW said that IKB’s subprime portfolio had significantly deteriorated since the bailout in August.
http://www.ft.com/cms/s/0/6bbdef7e-9d01-11dc-af03-0000779fd2ac.html
o Bear Stearns cuts 650 more jobs.

o This brings total job cuts at Bear Stearns to around 1500, more than 10% of its workforce.
http://www.ft.com/cms/s/0/73741f0a-9e1d-11dc-9f68-0000779fd2ac.html
o The Nationwide building society announces that UK housing prices fell by 0.8% in November, the largest drop in 12 years.
o The Bank of England releases data that mortgage approvals fell to their lowest level since 2005 in October.
o This data is starting to reveal the slowdown in the UK housing market.
http://www.ft.com/cms/s/0/6897bf0e-9ee7-11dc-b4e4-0000779fd2ac.html
o The US (White House) lowers its growth forecast for 2008 from 3.1% to 2.7%.
o The causes blamed were the ongoing problems in the housing and credit markets combined with high oil prices.
• December 3, 2007:
o Moody’s, a credit rating agency, says it has already cut or might cut ratings on debt up to $116 billion.
o Much of the debt was structure investment vehicles which invested heavily in the subprime market.
o The Financial Services Authority (FSA), the UK watchdog, warned mortgage lenders to prepare for the credit crunch to get much
worse.
o The FSA said that lenders needed contingency plans to guard against what could be the worst case scenario.
o According to the FSA, around $1.4 million borrowers are due to have their short term, fixed rate mortgages expire next year. These
loans were taken out when interest rates were lower.
o Fannie Mae attempts to shore up its capital position by announcing it will issue $7 billion in stock and cut its dividend by 30%.
o Fannie Mae faces capital problems because of the deteriorating US housing market.
http://www.ft.com/cms/s/0/3920b80c-a2d4-11dc-81c4-0000779fd2ac.html
o George W. Bush announces plans to help homeowners in trouble from the subprime crisis.
o The plan included freezing interest rates on subprime loans for five years.
o The plan would apply to loans taken out between January 2005 and July 2007 and would apply to borrowers who had less than 3%
equity in their homes and were no more than sixty days behind on their payments.
http://www.ft.com/cms/s/0/c43048c4-a467-11dc-a28d-0000779fd2ac.html
o The Royal Bank of Scotland warns that it expects to write down £1.25 billion because of exposure to the US subprime market.
o UBS announces $10 billion more in write downs associated with their subprime holdings.
o To cover the losses, UBS also reported a capital injection of $11.5 billion from the Singapore government and an unnamed Middle East
investor.
o This brings the total write downs for UBS to $13.7 billion so far but an analyst from Deutsche Bank predicted that UBS still has around
$9 billion in exposure.
http://www.marketwatch.com/news/story/ubs-take-further-10-bln/story.aspx?guid=%7B15C6A75F-FE8C-42A4-A24C-
DFC139EEB881%7D
http://www.ft.com/cms/s/0/45e93d6c-a76f-11dc-a25a-0000779fd2ac.html
o The Fed created a Term Auction Facility (TAF) designed to allow banks to get Fed funds by pledging all sorts of collateral.
o The TAF is open to all depository institutions judged to be in sound financial condition.
o TAF is designed to provide more liquidity to the ailing credit markets.
o The Federal Open Market Committee also approved swap agreements (reciprocal currency arrangements) which will provide $20 billion
to the European Central Bank and $4 billion to the Swiss National Bank. These swap lines were approved for up to six months.
http://www.ft.com/cms/s/0/ccb84dc2-a8bb-11dc-ad9e-0000779fd2ac.html
o The coordinated effort by the world’s central banks to inject liquidity into the financial system was agreed upon at the G-20 meeting, a
meeting of the world’s twenty largest economies, last month in Cape Town.
o The outlines of the responses were derived at the G-20 meeting and the central banks had stayed in close contact with each other and
were pushed into action as the markets deteriorated last week.
http://www.ft.com/cms/s/0/58e2e50e-a8c2-11dc-ad9e-0000779fd2ac.html
o CEO of Northern Rock, Adam Applegarth, leaves amid talks about nationalizing the troubled bank.
o Nationalization would allow Northern Rock to shrink its balance sheet without a fire sale of assets.
http://www.ft.com/cms/s/0/593ebd36-a9e7-11dc-aa8b-0000779fd2ac.html
o Citigroup adds $49 billion back to its balance sheet as it is forced to consolidate struggling off-balance sheet structure investment
vehicles (SIVs).
o Citi said that the possible ratings downgrade would make it too difficult for the SIVs to fund themselves.
http://www.ft.com/cms/s/0/8fcf3e48-a9e7-11dc-aa8b-0000779fd2ac.html
o The Fed backs measures to help subprime borrowers proposed by George W. Bush on December 6.
o Ben Bernanke, the Fed chairman, said the tougher regulations on mortgage lending would benefit both the individuals and the economy.
o The European Central Bank allocates $502 billion to banks at a below market interest rate to ease the credit crisis.
o The aim is to inject liquidity in the market and cut the cost of lending between commercial and retail banks.
o The ECB was one of five central banks to inject liquidity into the market.
o Morgan Stanley announces $9.4 billion in write downs from subprime losses.
o To cover the write downs, Morgan Stanley received a capital injection from a Chinese sovereign wealth fund on $5 billion.
http://www.ft.com/cms/s/0/294ed78a-ae3a-11dc-97aa-0000779fd2ac.html
o S&P ratings cuts ACA Financial Guarantee’s, a small bond insurer, rating from A to CCC.
o This effectively cut off ACA’s ability to insure more debt.
o This was in response to ACA’s third quarter results of large losses on their collateralized debt obligation portfolio.
http://www.ft.com/cms/s/0/40bc550c-adb1-11dc-9386-0000779fd2ac,s01=1.html
o Bear Stearns reports its first quarterly loss in its 84-year history of $854 million.
o There was a fourth quarter write down of $1.9 billion on Bear’s mortgage holdings.
o CEO Cayne and other top executives do not receive a bonus for 2007.
http://www.ft.com/cms/s/0/5f7d861c-af02-11dc-880f-0000779fd2ac.html
o Friends Provident, a UK commercial property fund, freezes withdrawals after a severe liquidity crisis caused by an investor run on the
fund to get their money out amid subprime fears.
o The fund has £1.2 billion under management and tells investors it could take up to six months to get their money out.
o This is significant because it is the first property fund to freeze withdrawals since the last property crash 15 years ago.
http://www.ft.com/cms/s/0/0c7e8112-af3b-11dc-880f-0000779fd2ac.html
• January 4, 2008:
o President, George w. Bush, meets with the Working Group on Financial Markets (WGFM) chaired by Secretary of the Treasury, Henry
Paulson.
o Even though the job creation increased for the last year, the longest streak since 2003, the WGFM warned the president of bad signals
in the economy such as inflation and consumer spending.
o The President responded by stressing that cooperation with Congress was necessary to keep taxes low and increasing oil supply from the
refineries in the US.
http://www.whitehouse.gov/news/releases/2008/01/20080104-4.html
• January 8, 2008:
o CEO of Bear Stearns, Jimmy Cayne, retires at age 73 amid the subprime problems at Bear Stearns.
o Cayne started work at Bear Stearns in 1969 and become CEO in 1993.
o Alan Schwartz, Bear Stearn’s president, takes over as CEO.
http://www.usatoday.com/money/industries/banking/2008-01-08-cayne-bear-stearns_N.htm
• January 9, 2008:
o The Global Economic Prospects study released by the World Bank predicts the worldwide economy will grow at 3.3% (in dollar terms)
in 2008.
o The bank estimates that the US will grow at 2.2% and emerging markets’ strong growth will help dampen the downturn effects of the
credit crisis on the worldwide economy.
http://www.ft.com/cms/s/0/18b13260-be43-11dc-8bc9-0000779fd2ac.html
o In an effort to retain its AAA rating and stave off liquidity concerns, MBIA slashes its dividend and announces plans to raise $1 billion
in debt.
o The bond insurer said that the dividend cut of more than 60% would save the company around $80 million a year.
http://www.ft.com/cms/s/0/7bba566c-bedd-11dc-8c61-0000779fd2ac.html
• January 11, 2008:
o Merrill Lynch and Citigroup announce plans to seek additional capital from sovereign wealth funds.
o This is just weeks ahead of the fourth quarter earning reports.
o Citigroup is expected to go back to the Abu Dhabi Investment Authority while Merrill is looking into the Kuwait Investment Authority.
http://www.ft.com/cms/s/0/da20ea54-bfe6-11dc-8052-0000779fd2ac.html
• January 15, 2008:
o Citigroup, the largest bank in the US, reports a $9.83 billion loss in the fourth quarter.
o This is mainly from an $18.1 billion write down on its subprime mortgage-related exposure.
o Citigroup also announced it would raise $12.5 billion in new capital to shore up its balance sheet.
o The largest part of this new capital, $6.88 billion, will come from the Government of Singapore Investment Corporation.
http://www.ft.com/cms/s/0/c962677e-c360-11dc-b083-0000779fd2ac.html
• January 16, 2008:
o JP Morgan Chase says it has cut the value of its investments in the US subprime market by $1.3 billion.
o On the same day, Wells Fargo reported a 37% loss in net income for the fourth quarter.
• January 17, 2008:
o Lehman Brothers announces plans to cut 1,300 jobs in its domestic mortgage division.
o The investment bank has already lost 2,500 jobs from the subprime lending problems.
http://www.bankingtimes.co.uk/17012008-lehman-brothers-lay-off-1300/
o Shares in large bond insurers crash as Moody’s Investor Services hints that they could lose their AAA rating.
o Ambac fell 52% and MBIA fell 31%. They are the two largest bond insurers.
o If these bond insurers were downgraded, the result could lead to $2,400 billion in downgrades for the bonds they insure.
http://www.ft.com/cms/s/0/665b9482-c52e-11dc-811a-0000779fd2ac.html
o Merrill Lynch reveals a net loss of $7.8 billion for 2007 compared to a $7.5 billion net profit in 2006.
o This loss is blamed on the $14.1 billion write down on Merrill’s investments related to subprime mortgages.
• January 18, 2008:
o After a run on assets, Aegon announces that investors may have to wait up to a year to get back their money in Scottish Equitable
property funds after a severe drop in liquidity.
o The fund’s total liquid assets drop to 5% after the run that Aegon blames the subprime credit worries.
o This is the second fund forced to freeze withdrawals since the subprime credit crunch has led investors to pull their money out.
http://cachef.ft.com/cms/s/0/4e1e9842-c560-11dc-811a-0000779fd2ac.html
• January 19, 2008:
o Fitch ratings downgrades Ambac, the world’s second largest bond insurer, from AAA to AA.
o The downgrade could undermine Ambac’s ability to add new business and will also affect the ratings of the billions of dollars in
securities it has guaranteed.
o The downgrades of the bonds that Ambac insures could force banks to come up with more capital to cover the increased risks.
http://www.ft.com/cms/s/0/c7edb82c-c634-11dc-8378-0000779fd2ac.html
• January 21, 2008:
o Trading partners with ACA Capital agree to give the troubled bond insurer until February 19 to come up with a permanent solution to
the S&P downgrade.
o The trading partners, which include some of the world’s largest banks, entered into a “forbearance agreement” in which they agreed to
waive all collateral requirements, policy claims, and termination rights until February 19.
o ACA wrote insurance on $69 billion in corporate and mortgage debt securities but announced that its claims paying base is only about
$425 million.
o ACA faces collapse if it can not come up with at least $1.7 billion to pay claims.
http://www.ft.com/cms/s/0/ca246b0a-c82c-11dc-94a6-0000779fd2ac.html
o Global stock markets in London and Europe suffer the biggest one day loss since September 11, 2001.
o The FTSE 100 index falls 5.5% wiping out £76 billion in market value as investors sell off equity for the safety of government bonds.
o Analysts say this is a response to the start of a US recession, fears of a deepening credit crisis, and Ambac being downgraded from
AAA by the Fitch credit rating agency.
http://www.ft.com/cms/s/0/b67403a6-c88e-11dc-94a6-0000779fd2ac.html
o WestLB, the third largest regional German bank, expects to take a net loss of $1.45 billion on exposure to the US subprime mortgage
market.
o The bank also announced it is planning to cut 2,000 jobs.
• January 22, 2008:
o A new panic in the global credit market leads the Fed to cut interest rates by 75 basis points.
o This is the largest cut in over two decades.
o The emergency cut is the first inter-meeting cut since September 11, 2001.
http://www.ft.com/cms/s/1/8c4b7b6a-c8f5-11dc-b14b-0000779fd2ac.html
http://www.ft.com/cms/s/0/66b4868a-c954-11dc-9807-000077b07658.html
o Ambac Financial reports a record loss of $3.26 billion.
o The loss comes in large part from the write downs of $5.21 billion on its guarantees of subprime mortgage-related bonds.
http://www.ft.com/cms/s/0/eebaf5f4-c928-11dc-9807-000077b07658.html
• January 24, 2008:
o Bush and Congress agree on a $150 billion economic stimulus plan to save the US economy from slipping into a recession.
o The package included sending tax refund checks from $300 to $1,200 to over 117 million American families.
o Also included was a lifting of the mortgage purchase limit of Fannie Mae and Freddie Mac from $417,000 to $625,000.
http://www.ft.com/cms/s/0/c86f0524-cae6-11dc-a960-000077b07658.html
o Barclays Capital voices concerns about the monoline insurers losing their AAA rating and said it may need to raise up to $143 billion.
o Analysts at Barclays say banks own $820 billion of securities guaranteed by bond insurers.
• January 26, 2008:
o Malcolm Knight, the chief executive of the Bank of International Settlements, called for the integration of world financial regulation.
o In a meeting at the World Economic Forum in Davos, Mr. Knight said that the fragmented financial regulation was partly to blame for
the current financial crisis.
http://www.ft.com/cms/s/0/cba56a7e-cbb0-11dc-97ff-000077b07658.html
o Financial Times announces that Bank of America (BofA) and Countrywide are in merger talks which would create the largest mortgage
lending group in the US.
o Analysts say the acquisition of Countrywide could cost BofA $30 billion in addition to the $2 billion BofA invested in preferred shares
of Countrywide in August.
http://www.ft.com/cms/s/0/23058d9e-ad71-11db-8709-0000779e2340.html
• January 29, 2008:
o New York state regulators appoint investment bankers to advise on a rescue plan to help bond guarantors keep their AAA ratings.
o Eric Dinallo, the N.Y. state insurance superintendent, is spearheading the plan.
o The discussions are proceeding on two tracks: 1) having banks provide back-up credit lines for bond insurers, and 2) having private
equity firms and billionaire investors provide fresh equity capital.
http://www.ft.com/cms/s/0/3c204e50-ce0d-11dc-9e4e-000077b07658.html
o The FBI announces a crackdown in the subprime lending market.

o There are fourteen companies involved in the investigation of lenders and investment banks.
o FBI agents are looking for any accounting fraud and insider trading in a joint investigation with the SEC.
• January 30, 2008:
o The leaders of Europe’s biggest economies meet in London for a credit crunch summit.
o The leaders warned credit rating agencies that they needed to address conflicts of interest and provide better information to the markets
or they would face new stricter regulation.
o Gordon Brown, the British prime minister, said that confidence in the credit rating agencies and big audit firms was vital to rebuilding
confidence in the financial markets.
http://www.ft.com/cms/s/0/d0ab3b4e-ced4-11dc-877a-000077b07658.html
o US and EU regulators agree the first system of mutual recognition between countries where both sides would recognize many of each
other’s rules.
o The agreement was approved between SEC chairman, Christopher Cox, and EU internal markets commissioner, Charlie McCreevy.
http://www.ft.com/cms/s/0/5ce64b1c-d132-11dc-953a-0000779fd2ac.html
o Financial regulators from the world’s leading economies meet in Amsterdam to address the deficiencies of the credit rating agencies
during the current credit crisis.
o The meeting was organized by The International Orginisation of Securities Regulators.
o Along with more regulation, the meeting also focused on ways that everyone could become less dependant on credit ratings.
o Agency ratings are widely used in Basel II capital requirements and by central banks in their assessment of acceptable collateral in
liquidity operations.
o Another issue being explored is the need to level the regulation playing field between heavily regulated areas such as bank balance
sheets and less regulated non-banking activities.
http://www.ft.com/cms/s/0/5d6ff934-d281-11dc-8636-0000779fd2ac.html
o The German government said the industrial nations need to agree on a concentrated action to address the subprime crisis.
o Peer Steinbrück, finance minister of Germany, will outline proposals to give the Group of Seven Finance Ministers and also Parliament.
o A ministry official did not think the world need Basel III but rather better, faster and more universal enforcement of Basel II.
http://www.ft.com/cms/s/0/1aa28d4c-d407-11dc-a8c6-0000779fd2ac.html
o GMAC reports a loss of $724 million in the fourth quarter of 2007, bringing the total loss for the year to $2.3 billion compared to an
income of $2.1 billion in 2006.
o GMAC blamed the loss on their struggling home lending unit, Residential Capital, who totaled a $4.3 billion loss.
o S&P releases detailed reform proposals to address internal processes in response to regulator pressure and investor anger.
o The detailed reform plan had 27 action points focused on four main areas: 1) reforms in the governance procedures to address any
conflicts of interest, 2) increased efforts to examine the accuracy of its credit ratings, 3) increase the transparency of the ratings by
adding identifier marks and what if scenarios, and 4) try to improve investor education.
http://www.ft.com/cms/s/0/bcdc17e8-d4e5-11dc-9af1-0000779fd2ac.html
o Deutsche Bank reports profits of $9.4 billion for 2007 and seems to have dodged the worse of the subprime crisis.
o The bank’s chief executive, Josef Ackermann, said that if leveraged loans were included, Deutsche wrote down €2.2 billion in the third
quarter of 2007 followed by an insignificant amount in the fourth quarter.
o Mr. Ackermann also said that he did not expect any more write downs from subprime portfolios but the bank still had exposure to
leveraged loans.
o The Group of Seven Finance Ministers meet in Tokyo and project that the write off losses on US subprime mortgages could reach $400
billion.
o The finance ministers stressed the need for banks to provide full and prompt disclosure of the losses so confidence in the financial
system could be restored.
http://www.ft.com/cms/s/0/43d644aa-d845-11dc-98f7-0000779fd2ac.html
o Billionaire Warren Buffett offers to take more than $800 billion of municipal bonds backed by three monolines: Ambac, MBIA, and
FGIC.
o The idea would be to prop up the municipal bond markets in response to a possible credit rating downgrade of the monolines that insure
them.
o Ambac declined the offer and MBIA did not comment.
http://www.ft.com/cms/s/0/7ea3b5f4-d971-11dc-bd4d-0000779fd2ac.html
o Credit Suisse announces that write downs on the subprime mortgage exposure only totaled 2 billion Swiss francs for 2007, less than
analysts expected.
o Data from the Financial Services Agency (FSA), the Japanese financial watchdog, shows that losses from the Japanese exposure to the
subprime crisis reached $5.6 billion in 2007.
o Of the $5.6 billion in write downs, more than half came from the last three months of 2007.
o Germany’s second largest bank, Commerzbank, announces record profits in 2007 despite $1.1 billion in write downs linked to the US
subprime mortgage crisis.
o Swiss bank, UBS, confirms a 2007 loss of $4 billion on $18.4 billion in write downs associated with the subprime crisis.
o The bank also unveiled another $26.6 billion in exposure to risky mortgages.
o New York governor, Elliot Spitzer, gives monolines three to five business days to raise capital or face a break-up by state regulators to
safeguard the municipal bond market.
o This warning came right before Moody’s pulled its AAA rating from Financial Guarantee Insurance Company.
o Spitzer proposed splitting the insurers into two separate divisions: 1) municipal bond business, and 2) riskier activities such as
guaranteeing complex structured securities.
http://www.ft.com/cms/s/0/48d56d8e-db68-11dc-9fdd-0000779fd2ac.html
o Bangladesh’s Grameen Bank loans $50,000 to the US poor.

o The Grameen Bank specializes in loaning money to poor women who do not have bank accounts.
o Because of the credit crisis, Muhammad Yunus (the bank’s founder), stated that this is the perfect time to enter the US market to
provide loans to the people who could not otherwise obtain them.
o Grameen plans to loan $176 million, over the next five years, to the needy in New York who do not have access to financial institutions.
http://www.ft.com/cms/s/0/d05bb6d2-dc30-11dc-bc82-0000779fd2ac.html
o Britain announces the nationalization of Northern Rock.

o Northern Rock owed the Bank of England £25 billion in loans after a run on the bank last September.
o Alistair Darling, the UK Chancellor, said the two private offers to buy out the bank were not enough to ensure that the loans would be
paid back.
http://www.ft.com/cms/s/0/9ba3c422-dd6e-11dc-ad7e-0000779fd2ac.html
o Loans given by the Fed through the Term Auction Facility reach $50 billion in one-month funds.
o Analysts fear that the garbage collateral given for these loans is increasing the Fed exposure to the credit crisis.
o The TAF is seen as a way to channel liquidity into the credit crisis instead of using the discount window which could trigger investor
concern.
http://www.ft.com/cms/s/0/66db756a-de5d-11dc-9de3-0000779fd2ac.html
o ACA Capital secures another 30-day extension from trading partners to come up with $1.7 billion to pay claims on CDOs that it
insured.
http://www.ft.com/cms/s/0/c8306b54-dfde-11dc-8073-0000779fd2ac.html
o A group of banks agree to inject $2 to $3 billion into the bond insurer Ambac to avoid a ratings downgrade.
o The banks involved include Citigroup, Wachovia, Barclays, Royal Bank of Scotland, Societe Generale, BNP Paribas, UBS, and
Dresdner.
o A fall from the AAA rating for Ambac could mean billions of dollars worth of write downs for banks holding the Ambac guaranteed
instruments.
http://www.ft.com/cms/s/0/73450cf8-e187-11dc-a302-0000779fd2ac.html
o The European Commission asks sovereign wealth funds to accept a voluntary code of conduct.
o Peter Mandelson, the European trade commissioner, said the code would set out basic standards of governance and transparency for the
funds.
o The International Monetary Fund, who estimates the state owned funds control about $1,900 to $2,900 billion in global funds, is also
preparing voluntary guidelines.
o The concern arose because of the large investments the sovereign wealth funds have made into large banks during the credit crisis.
o Mr. Mandelson said it is important for the funds to have emphasis on commercial motivations instead of national or strategic
considerations.
http://www.ft.com/cms/s/0/f431c8d4-e1b3-11dc-a302-0000779fd2ac.html

o The Eurozone appears to have avoided the worst of the credit crunch as numbers for January show that borrowing by businesses grew at
a record rate.
http://www.ft.com/cms/s/0/604ce6c6-e564-11dc-9334-0000779fd2ac.html
o The chief executive of the Financial Services Authority, Hector Sants, warns that the current restructuring of banks’ business models
will lead to higher borrowing costs.
o Mr. Sants said that when regulators step in and require banks to keep more loans on their balance sheets, instead of repackaging and
selling them, the loans become more expensive for the banks who will pass on the costs to consumers.
o The FSA had just announced that banks might be required to maintain higher reserves than before, also raising the costs of loans.
o Mr. Sants said that easy credit is not necessarily a good thing for consumers or the economy in the long term as can be seen by the
current credit crunch.
http://www.ft.com/cms/s/0/558687c0-e59f-11dc-9334-0000779fd2ac.html
o AIG announces a $5.2 billion loss for the fourth quarter of 2007, the second consecutive quarter of losses.
o The largest portion of losses came from AIG writedowns of $11.12 billion (pretax) concerning their revaluation of a large credit default
swap portfolio.
o AIG has written $78 billion in credit default swaps which may be trouble if the housing market continues its downturn.
http://www.marketintelligencecenter.com/articles/544978
http://www.ft.com/cms/s/0/d586ccaa-e667-11dc-8398-0000779fd2ac.html
o Fed chairman, Ben Bernanke, warns of increasing bank failures in a speech to the Senate Banking Committee.
o Mr. Bernanke said the banks that were most in danger are the small US banks that are heavily invested in local real estate where the
prices are plummeting.
o Mr. Bernanke also stressed that the US was in a weaker position to respond to the credit crisis than in 2001 because of inflation
concerns and the weak dollar.
http://www.ft.com/cms/s/0/f966fc3c-e647-11dc-8398-0000779fd2ac.html
o George W. Bush attacks a Democrat-sponsored housing bill to ease the credit crunch and threatens to veto the bill if it makes it through
Congress in the current form.
o Major features of the bill include: 1) changes in the bankruptcy code that makes it easier for individuals to keep their homes, 2) $200
million in funds for foreclosure counseling, and 3) a proposed $4 billion fund to purchase and redevelop foreclosed homes.
o Bush opposed this bill because it would give judges the power to rewrite mortgage contracts, leading to higher interest rates because of
the higher risk to lenders and the bill “would be unfair to the millions of homeowners who make hard choices every month to pay their
mortgage on time and it would be unfair to future homebuyers.”
http://www.ft.com/cms/s/0/1bdfdd86-e668-11dc-8398-0000779fd2ac.html
• March 3, 2008:
o UK’s largest bank, HSBC, reports a $17.2 billion loss on write downs of its US mortgage portfolio.
• March 5, 2008:
o The Institute for International Finance (IIF), a Washington-based association of global banks, starts a week-long meeting in Rio.
o One of the key topics discussed will be a “best practice” code to address bank shortcomings.
o This code will address issues such as risk management, liquidity operations, and improving underwriting standards.
o Some believe that this meeting is being driven by the fear that regulators will come down hard on the banks unless the banks can prove
they can preemptively cleanup their own acts.
o The meeting will also include proposals for investment banks to curb top executive bonuses which have come under political backlash
because of their risk taking incentives.
http://www.ft.com/cms/s/0/cb5fa1a0-ea3d-11dc-b3c9-0000779fd2ac.html
http://www.ft.com/cms/s/0/d41d10bc-ea55-11dc-b3c9-0000779fd2ac.html
o France’s largest retail bank, Credit Agricole, announces a €857 million loss after write downs of €3.3 billion on its exposure to the
credit crisis.
o This loss was worse than what the bank forecasted in December 2007.
• March 6, 2008:
o A £1 billion hedge fund controlled by Peloton Partners collapses.

o The ABS Master Fund returned an 87% growth rate last year but was unable to meet interest payments on loans taken out as a result of
the credit crunch.
• March 10, 2008:
o Rumors start to appear on Wall Street that Bear Stearns could have liquidity problems.
o Investors believe rumors as financial stocks drop in value.
http://www.ft.com/cms/s/0/82fc3642-eecc-11dc-97ec-0000779fd2ac.html
o Lehman Brothers cuts 5% of its workforce across all lines of business.

o The 1,425 people are added to the almost 4,000 jobs already lost at Lehman in the last year.
http://www.cnbc.com/id/23558853
o Ambac, a troubled bond insurer, announces plans to issue $1.25 billion of new shares and $250 million of equity-linked instruments.
o This was in response to the possible downgrade of its AAA ratings from Moody’s and S&P.
o A consortium of large banks will purchase most of these shares.
http://www.ft.com/cms/s/0/6e0d2c7a-eed9-11dc-97ec-0000779fd2ac.html
http://www.ft.com/cms/s/0/03ba9478-ecb5-11dc-86be-0000779fd2ac.html
o The Financial Guarantee Insurance Company (FGIC), a monoline based in New York, sues German bank IKB for fraud.
o The complaint charges IKB with providing false and misleading information that convinced the bond insurer to provide insurance and
exposed it to $1.9 billion of potential liabilities.
o FGIC says this fraud contributed to its recent ratings downgrade.
http://www.ft.com/cms/s/0/160244d6-eee1-11dc-97ec-0000779fd2ac.html
• March 11, 2008:
o The Fed offers primary dealers up to $200 billion in treasury securities for 28 days and accepts AAA-rated private mortgage backed
securities as collateral.
o The move exposes the Fed to possible default and credit risk on the MBS securities that will ultimately end up being paid by the
taxpayers.
o The plan is to boost liquidity in the troubled MBS market.
o The loans will be implemented by a new Term Securities Lending Facility that will be available to investment banks.
http://www.ft.com/cms/s/0/62008f04-efd7-11dc-8a17-0000779fd2ac.html
http://www.ft.com/cms/s/0/ffbfafc8-efd6-11dc-8a17-0000779fd2ac.html
• March 12, 2008:
o Bear Stearns CEO, Alan Schwartz, appears on an interview broadcast by CNBC.

o Mr. Schwartz assures investors that there is no reason to worry and Bear Stearns has an adequate liquidity cushion. He stresses there has
been no change in Bear Stearn’s liquidity position.
o He claims the stock variability in the last few days has been caused by speculation on rumors that are not true.
http://www.cnbc.com/id/23590249/
o In his first budget speech Chancellor Alistair Darling reveals plans to get the mortgage market back on track in the UK.
o These plans include focusing on long term mortgages (up to 25 years) to create more stability and grading mortgages according to risk
with the safest mortgages being labeled the “gold standard.”
o Mr. Darling said the aim of these changes is to increase home building in the UK.
http://www.forbes.com/markets/feeds/afx/2008/03/12/afx4763667.html
• March 13, 2008:
o The Working Group on Financial Markets (WGFM) released a statement with recommendations to President Bush on how to improve
both the US economy along with the global economy.
o The objectives of the recommendations were to: 1) improve transparency and disclosure, 2) better risk awareness and management, and
3) stronger oversight to help mitigate systematic risk, restore investor confidence, and facilitate economic growth.
o The WGFM made over thirty specific recommendations which addressed: 1) mortgage origination, 2) improving investor contributions
to market discipline, 3) reforming credit rating agencies, 4) strengthen global financial institutions’ risk management practices, 5)
enhance prudential regulatory policies, and 6) enhance the OTC derivative market infrastructure.
http://www.ustreas.gov/press/releases/reports/pwgpolicystatemktturmoil_03122008.pdf
o Bear Stearns reports that liquid assets have dropped to $2 billion caused largely by loss of investor confidence in the swirling rumors of
illiquidity.
o This reflects a loss of $15 billion in cash and cash equivalents in two days (as reported by the SEC on March 11, 2008).
http://online.wsj.com/article/SB120580201721743861.html?mod=hpp_us_inside_today
o A $22 billion mortgage-backed hedge fund run by Carlyle Capital Corporation collapses with the remaining assets to be taken by banks
for repayment of debts.
o The fund was slightly leveraged with $31 in debt per every $1 in equity.
o Co-founder of the Carlyle Group, David Rubenstein, pledged to get investors their money back.
http://www.ft.com/cms/s/0/66b143c4-f0cf-11dc-a91a-0000779fd2ac.html
• March 14, 2008:
o Bear Stearns sets up an emergency funding agreement with JP Morgan Chase (JPMC) to access liquidity if needed.
o The Federal Reserve Bank of N.Y. openly supported this agreement and provided JPMC with a non-recourse discount window.
o Talks about permanent financing were discussed between Bear Stearns and JPMC.
http://www.ft.com/cms/s/0/2814f4d0-f1fb-11dc-9b45-0000779fd2ac.html
http://www.ft.com/cms/s/0/43697fa6-f1cb-11dc-9b45-0000779fd2ac.html
o Treasury Secretary, Henry Paulson, gives policy recommendations to avoid a repeat of the credit crisis.
o The six specific recommendations are: 1) tougher disclosure requirements for banks and Wall Street firms, 2) introduction of a
nationwide licensing system for mortgage brokers, 3) new rules for credit rating agencies, 4) strengthening state and federal oversight
of mortgage originators and brokers, 5) revisiting Basel II capital requirements to ensure banks are able to manage liquidity and hold
enough capital to cover the risks, and 6) financial institutions need to raise more capital and lower dividends to shore up their balance
sheets.
http://www.ft.com/cms/s/0/5741144c-f169-11dc-a91a-0000779fd2ac.html
o Barney Frank, chairman of the House of Representatives Financial Services Committee, proposes new legislation that will allow the
Federal Housing Administration to provide $300 billion to help troubled borrowers refinance their mortgages to avoid foreclosure.
http://www.ft.com/cms/s/0/5741144c-f169-11dc-a91a-0000779fd2ac.html
• March 16, 2008:
o JPMC announces they will acquire Bear Stearns for $2 per share.
o The Federal Reserve Bank agreed to fund up to $30 billion of Bear’s long-term assets to alleviate the need for a fire sale.
o The share price of Bear Stearns was traded at $30 on March 14, 2008.
http://www.ft.com/cms/s/0/e2206ed2-f380-11dc-b6bc-0000779fd2ac.html
• March 17, 2008:
o An article in Time points out that the Credit Default Swaps (CDS) market could become unstable after the Bear Stearns bailout.
o A CDS is like an insurance contract where a company promises to cover certain securities in the event of a default.
o In mid-2007, the CDS market was at $45 trillion, more than twice the size of the US stock market.
o Commercial banks are the most active in the CDS market with the top 25 banks holding more than $13 trillion.
http://www.time.com/time/business/article/0,8599,1723152,00.html
o UBS reduces its balance sheet by $520 billion after adjusting the Bear Stearns sale price.
o This is a 20% reduction over the amount at the end of 2007.
http://articles.moneycentral.msn.com/Investing/Extra/BanksBraceForGlobalFinancialCrisis.aspx
• March 18, 2008:
o The Bear Stearn’s collapse highlights the SEC’s inability to react to the crisis.
o The SEC was the main regulator that was in charge of the oversight of Bear Sterns but did not have the authority to inject the much
needed cash to stem the crisis.
http://online.wsj.com/article/SB120580201721743861.html?mod=hpp_us_inside_today
o Lehman Brothers and Goldman Sachs announce profits for the first quarter were better than analysts expected but, because of the credit
crunch, half of what they were last year.
• March 24, 2008:
o JPMC raises its price on Bear Stearns to $10 per share after the original merger at $2 per share fell through because of legal errors and
opposition by Bear shareholders.
http://www.ft.com/cms/s/0/35054692-f9a6-11dc-9b7c-000077b07658.html
• March 26, 2008:

o The Bank of China (BoC) backs increased growth in securitization holdings despite a $1.3 billion write down because of US subprime
mortgage losses.
o The BoC had the largest exposure to US subprime mortgages out of any Asian banks.
o The BoC’s executive bank president, Wang Yongli, stressed that there is a strong demand for asset-backed securities but they needed
better transparency, infrastructure, and regulation to be as effective as they could be.
http://www.ft.com/cms/s/0/3005263a-fad7-11dc-aa46-000077b07658.html
• March 27, 2008:
o Moody’s proposes measures to help ensure mortgage lenders provide more transparency on borrower information.
o If the lenders do not meet the transparency requirements, Moody’s said it would hold back the best rating or decline to rate the
instrument altogether.
o The new requirements would require issuers of mortgage-linked securities to conduct more thorough checks on underlying loans such as
property value, borrower income, employment, and occupancy.
http://www.ft.com/cms/s/0/b10d4894-fb9e-11dc-8c3e-000077b07658.html
o The Financial Services Authority, the UK watchdog, releases an internal report showing many regulation failures in their oversight of
Northern Rock, the failed UK bank that had to be nationalized because of lack of liquidity.
o The main errors highlighted in the report were: 1) extraordinarily high turnover of FSA staff directly supervising Northern Rock, 2)
inadequate numbers of staff assigned to Northern Rock, and 3) very limited direct contact with Rock executives.
o Since January 2005, Northern Rock only had eight meetings with the FSA while its peers averaged around seventy-four.
o In response, the FSA has committed to hiring more staff and specialists to oversee the complex financial models that banks use in
assessing risk.
http://www.ft.com/cms/s/0/605ff6ac-fb9f-11dc-8c3e-000077b07658.html
• March 31, 2008:
o Secretary of the Treasury, Henry Paulson, announces Blueprint on Regulatory Reform.

o The Blueprint contained objectives of creating a regulatory model that would have three regulators: 1) one focused solely on market
stability across the entire financial sector, 2) one focused on safety and soundness of the institutions supported by a federal guarantee,
and 3) one focused on protecting consumers and investors.
o Along with the long term model, Mr. Paulson also announced near term recommendations which included an executive order clarifying
the role of the President’s Working Group on Financial Markets and state-level regulation of the mortgage origination regulation
supplemented by a federal commission called the Mortgage Origination Commission.
o Paulson also gave four immediate term recommendations which included: 1) better payment and settlement systems oversight, 2)
merging the SEC and CFTC into one regulatory structure, 3) allowing an optional federal charter for insurance, and 4) revocation of
the Federal Thrift Charter.
o Gordon Brown, British Prime Minister, and George W. Bush announce plans for cooperation plans with the establishment of a bank
watchdog.
o The UK-US working group will be composed of senior treasury and regulatory figures from London and Washington.
o The goal is to establish a common approach on how to respond to the credit crisis before the spring meetings of the G7, IMF, and
Worldbank.
o The group will 1) examine the role of credit rating agencies in evaluating risk, 2) look into improving transparency in the valuation of
financial products, and 3) improve day-to-day cooperation between US and UK regulators.
http://www.ft.com/cms/s/0/51c5a268-feba-11dc-9e04-000077b07658.html
o Northern Rock, a month after being nationalized by the British government, announces plans to repay £23 billion in loans owed to the
Bank of England.
o The plans include cutting 1/3 of its staff, halving the balance sheet, and shedding 60% of its mortgage holders.
http://www.ft.com/cms/s/0/583668e6-ff0d-11dc-b556-000077b07658,dwp_uuid=74d73d92-650f-11dc-bf89-0000779fd2ac.html
• April 1, 2008:
o UBS announces it will write down $19 billion in the first quarter on its US holdings.
o Marcel Ospel, Chairman of the Board, says he will not seek reelection under pressure to step down because of failure to identify
exposure to the credit crisis.
o UBS shares have fallen 83% in the previous year.
o This is following $18 billion in write downs during 2007.
o UBS announces a rights offering of $13.1 billion to help offset the write downs
http://www.ft.com/cms/s/0/38198c72-ffae-11dc-825a-000077b07658,dwp_uuid=1b36efb2-ffc9-11dc-825a-000077b07658.html
o Deutsche Bank announces it will write down $3.9 billion in the 1 st quarter.
o The write downs were linked the German bank’s leveraged loan portfolio which included exposure to commercial real estate, half of
which was in the US.
o Chief executive, Josef Ackerman, said the write downs in the 1 st quarter totaled more than all of 2007 when the credit crisis started.
http://www.ft.com/cms/s/0/db1cb9ae-ffc1-11dc-825a-000077b07658.html
• April 2, 2008:
o Charlie McCreevy, the internal markets commissioner in the EU, pleaded for various European institutions to reach an agreement on
changes to Basel II capital requirements.
o Proposed changes include rules to limit the risk stemming from large bank exposures, harmonization of definitions of hybrid capital,
capital requirements for default risks in banks’ trading books, and technical changes to the securitization framework.
o McCreevy also backed changes to the Lamfalussy process which would give clearer responsibility to “level three” committees.
http://www.ft.com/cms/s/0/7c2bf464-005c-11dd-825a-000077b07658.html
o A confidential option paper is leaked from the Financial Stability Forum made up of central bank and finance ministers from around the
world
o While yet to agree on analysis, the paper encourages delegates to have banks improve disclosure and replenish capital.
o The paper addresses improvements in banking regulation by providing suggestions: 1) greater transparency over who owns the asset-
backed securities and how they are valued, 2) disclosure by the largest banks to a common template including common methodologies
for on and off balance sheet exposure, 3) allowing changes to accounting rules to provide breathing space for the banks and purchases
of assets by authorities to put a floor on prices, and 4) forcing banks that have a significant amount of bad assets on their books to raise
capital.
http://www.ft.com/cms/s/0/9c02c24a-005c-11dd-825a-000077b07658.html
http://www.ft.com/cms/s/0/9f0777ec-ff85-11dc-b556-000077b07658.html
o The Bank for International Settlements releases a report stating that the complex debt securities used to repackage asset-backed bonds
will likely disappear as a result of the credit crisis.
o The report said that issuances of collateralized debt obligations of asset-backed securities had been running at $70-$100 billion a quarter
from the final quarter of 2005 until the 2 nd quarter of 2007.
o Almost $150 billion of CDOs have defaulted and over 2,500 ratings downgrades have been issued.
http://www.ft.com/cms/s/0/b8a75cd8-0059-11dd-825a-000077b07658.html
o A report released by Morgan Stanley says that investment banking is in the midst of the worse crisis in 30 years.
o The report warns that investment banking revenues will fall 20% this year excluding the expected $75 billion in further write downs.
http://www.ft.com/cms/s/0/ca22152e-005a-11dd-825a-000077b07658.html
• April 3, 2008:
o The credit crisis forces some hedge funds to restrict withdrawals.

o The combination of banks unexpectedly pulling credit lines and demanding more security against loans combined with investors
abandoning them has lead to liquidity problems and the hedge funds are incurring heavy losses by holding fire sales to meet
withdrawals.
o Some of the troubled funds have responded by limiting investor withdrawals.
http://www.ft.com/cms/s/0/ee9153a0-01bf-11dd-a323-000077b07658.html
o Moneyfacts, a UK financial information group, releases data showing that the number of mortgages available in the UK has dropped 8%
in just the last week and 40% in the last month.
o Lenders First Direct and Halifax have both pulled several mortgage products recently.
http://www.ft.com/cms/s/0/a0121bd6-0117-11dd-a0c5-000077b07658.html
• April 6, 2008:
o No deposit mortgages disappear from the UK housing market as Abbey, the last lender to offer 100% loans, pulls the product.
o More than 20 lenders in the UK offered no deposit mortgages at the beginning of March.
o This will make it much more difficult for first-time homebuyers to obtain financing.
o Abbey stated the reason they withdrew the product was market conditions surrounding the default rate on subprime mortgages.
http://www.ft.com/cms/s/0/723fe682-0506-11dd-a2f0-000077b07658.html
• April 7, 2008:
o Chief executive of KfW, Ingrid Matthäus-Maier, resigns because of health reasons.

o KfW bailed out troubled German bank IKB in August 2007 and the original bailout of €1 billion had turned into €7.2 billion as new
losses from IKB’s exposure to the US subprime market were realized.
o Mrs. Matthäus-Maier said that she realized she did not have the full health required to continue dealing with the IKB turmoil.
http://www.ft.com/cms/s/0/201a6478-04c9-11dd-a2f0-000077b07658.html
o The Concise Oxford English Dictionary (OED) announces that subprime and credit crunch will be among the new words included in the
next edition.
o The OED defines credit crunch as “a severe shortage of money or credit.”
o The OED defines subprime as “a credit or loan arrangement for borrowers with a poor credit history, typically having unfavourable
conditions such as high interest rates.”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/04/bcnoed104.xml
• April 8, 2008:
o The International Monetary Fund releases its Global Stability Report.

o The new estimate on credit crunch losses is projected upwards to $945 billion.
o This $945 billion estimate assumes that the worse of the credit crunch is over and this estimate could go much higher if new
developments like the Bear Stearns bailout materialize.
http://www.ft.com/cms/s/0/61c7e85a-0596-11dd-a9e0-0000779fd2ac.html
o The Financial Times reports that Citigroup is in negotiations with private equity firms to sell $12 billion in loans to shrink their balance
sheet and exposure to the subprime crisis.
o People familiar with the deal said that three private equity firms were involved: Apollo Management, the Blackstone Group, and TPG.
o Estimates say that the private equity firms will buy the distressed debt at 90 cents on the dollar.
http://www.ft.com/cms/s/0/314ec50a-05a4-11dd-a9e0-0000779fd2ac.html
• April 9, 2008:
o Washington Mutual, the largest savings and loans bank in the US, announces it will raise $7 billion from outside investors to cover
losses arising from its subprime mortgages.
o The investors are led by a private equity group, TPG, which will provide $2 billion.
o The investment will come in the form of an additional 176 million of new shares of stock.
http://www.ft.com/cms/s/0/131908be-0579-11dd-a9e0-0000779fd2ac.html
• April 11, 2008:
o The Council for Mortgage Lenders (CML) warns that mortgage lending in the UK could go down by 50% if fresh liquidity is not
injected into the market.
o Steven Crawshaw, CML’s chairman, stated that without new funding sources, lenders would continue to decrease demand by tightening
criteria, increasing prices, or just withdrawing more products from the market.
http://www.ft.com/cms/s/0/b6365efa-080f-11dd-a922-0000779fd2ac.html
• April 14, 2008:
o Wachovia announces plans to raise $7 billion in capital after reporting a first quarter loss of $393 million.
o The $7 billion will come from an offering of common stock and convertible preferred shares.
o In addition to the offering, in an attempt to save $4 billion over the next four years, Wachovia also announced it would slash its
dividend by 41% and cut 500 jobs in its investment bank.
http://www.ft.com/cms/s/0/a1e5c66e-0a46-11dd-b5b1-0000779fd2ac.html
• April 17, 2008:
o Merrill Lynch reveals first quarter losses of $1.96 billion compared to a profit of $2.1 billion last year.
o The bank said it plans to cut 4,000 jobs worldwide.
o The results included $4.5 billion in write downs in the first quarter mostly from subprime mortgages to add to its $24 billion in write
downs from last year.
• April 18, 2008:
o Citigroup reports a $5.11 billion loss in the first quarter of 2008 off of a $12 billion write down on subprime mortgage loans and other
risky assets.
o The largest US bank also announced it would cut 9,000 more jobs in addition to the 4,200 lay-offs announced in January.
• April 22, 2008:
o Bank of England offers to acquire UK banks’ mortgage-backed securities for up to three years in return for Treasury bills.
o Facility to be open for 6 months.
o Central bank believes this will remove fear that solvent banks won’t be able to settle their debts. This should unblock interbank
lending.
http://www.ft.com/cms/s/0/7a259586-1005-11dd-8871-0000779fd2ac.html
o The Royal Bank of Scotland announces a deeply discounted £12 billion rights issue in attempt to raise capital to cover £5.9 billion in
write downs on its April-June investments.
o The rights issue is the largest in UK corporate history and the write downs are the largest yet for a British bank.
http://www.ft.com/cms/s/0/18290fbc-1036-11dd-b8d6-0000779fd2ac.html
• April 23, 2008:
o US bank failures could rise above historic norms, says OCC.

o Banks are increasing their loan loss reserves.
o OCC especially worried about smaller banks lending to commercial real estate developers.
o Write downs across financial system from subprime related assets exceed $200 billion and are set to rise.
o So far the 20 largest banks have raised in excess of $80 billion in capital since October.
http://www.ft.com/cms/s/0/a547eb54-10cf-11dd-b8d6-0000779fd2ac.html
o SEC draws up rules to govern credit rating agencies, who some say contributed to the credit crisis.
http://www.ft.com/cms/s/0/f2986582-10cf-11dd-b8d6-0000779fd2ac.html
o Big US financial groups have raised more than $28 billion in capital markets in recent days.
o Wall Street bankers say the worst of the crisis is over.
o Regulators are pleased that investment banks are raising capital and pushing commercial banks to do the same.
http://www.ft.com/cms/s/0/1e873040-10d2-11dd-b8d6-0000779fd2ac.html
• April 24, 2008:
o Deutsche Bank prepares another multibillion dollar sale of leveraged loans.

o Banks are trying to sell a backlog of about $100 billion in leveraged loans they’re holding.
o DB sale would be the third big sale in April. Citigroup led way with $12 billion sale,
o The DB sale followed with $5 billion of US leveraged loans.
http://www.ft.com/cms/s/0/4c537af2-1199-11dd-a93b-0000779fd2ac.html
o The UK’s largest homebuilder, Persimmon, announces sales in the past three weeks are down more than 33% from last year.
o Persimmon also said that it was abandoning plans to develop new sites until the housing market improved.
o Chief Executive of Persimmon, Mike Farley, said one of the causes is the lack of mortgage funds available to build new houses.
http://www.ft.com/cms/s/0/0e6833a8-1235-11dd-9b49-0000779fd2ac.html
• April 30, 2008:
o Banks improve balance sheets by selling off leveraged loans. US overhang of highly leveraged granted for buy-out deals at the height
of the credit bubble in first half of 2007 has been cut from almost $250 billion to about 90 billion. European banks are not selling
loans as aggressively.
o Banks are starting to rid themselves of mortgage-linked securities (e.g., UBS).
o Banks are finding it hard to relaunch the securitization business.
http://www.ft.com/cms/s/0/e5c5dff2-1583-11dd-996c-0000779fd2ac.html
• May 1, 2008:
o Citigroup raises $4.5 billion in equity offering. The Article lists capital raisings.
http://www.ft.com/cms/s/0/77157910-1717-11dd-bbfc-0000779fd2ac.html
• May 6, 2008:
o Swiss Reinsurance Co., the world’s biggest reinsurer, announces write downs of $782 million when restructuring credit default swaps.
o This brings the total write downs for Swiss to total over 2 billion francs over the last six months.
http://www.bloomberg.com/apps/news?pid=20601085&sid=amxJWcUVMoFo&refer=europe
o UBS unloads $15 billion of subprime mortgage debt to the US asset manager, BlackRock.
o The debt is being sold at a 25% discount from its face value of $20 billion.
o The bank retained a minority interest in the debt allowing it to participate in any potential upside.
o BlackRock, which is currently 49.8% owned by Merrill Lynch, manages about $1,360 billion in assets including $29 billion from the
Bear Stearns bailout.
o This deal is significant because it shows that private investors are willing to place bets that the cost of the subprime debt is lower than
the gains they will receive once the market turns around.
http://www.ft.com/cms/s/0/45c01eb0-1afa-11dd-aa67-0000779fd2ac.html
• May 8, 2008:
o US Treasury chief, Henry Paulson, believes we are closer to the end of the credit crisis than the beginning.
o Mr. Paulson says that there is still a ways to go in the process of deleveraging the financial system but believes the credit crisis is
entering its later stages.
o One of the better signs is the capital that has recently been infused into the banking system through private equity and the purchases of
leveraged loans from the balance sheet of the banks.
http://www.ft.com/cms/s/0/05c68978-1c96-11dd-8bfc-000077b07658.html
o SEC chairman, Christopher Cox, warns Wall Street banks to be more open and transparent with the market.
o Mr. Cox said that US regulators will soon require banks to make public more details about capital and liquidity positions, likely starting
after the second quarter.
o Mr. Cox also made a plea to Congress to pass legislation to give regulators an explicit mandate to supervise investment banks.
http://www.ft.com/cms/s/0/a8b0e0c0-1c96-11dd-8bfc-000077b07658.html
• May 9, 2008:
o AIG reports 1 st quarter earnings results as a net loss of $7.81 billion.

o One of the principle factors of this loss was a 1 st quarter write down of $9.11 billion on the revaluation of their credit default swap
portfolio.
o AIG also announced they will raise $12.5 billion in capital through a stock offering to help alleviate any liquidity concerns.
o Two major rating agencies downgraded the AIG Holding Company to AA- after hearing the news of the losses but left the insurance
company subsidiaries at AA+.
http://seekingalpha.com/article/76590-american-international-group-inc-q1-2008-earnings-call-transcript
• May 11, 2008:
o Eighty private equity firms have started raising money in the past ten months to buy bad mortgage debt at deeply discounted rates.
o Some of these groups have been active in the market such as Apollo, Blackstone, and TPG. Others raising money include Marathon
Asset Management, GSC Group, Pimco, and Fortress Investment Group.
o These investors are betting that the valuation techniques are valuing the debt below what it is worth because of the complexity
associated with it.
http://www.ft.com/cms/s/0/636228e6-1f6e-11dd-9216-000077b07658.html
• May 12, 2008:
o HSBC, Europe’s largest bank, reports that it has written off $3.2 billion in the first three months of 2008 from its exposure to the US
subprime market.
o This put HSBC fourth among total write downs behind Citibank, UBS, and Merrill Lynch.
• May 13, 2008:
o The Financial Times releases a write downs table showing the worldwide bank write off totaling almost $450 billion since January
2007.
o The table also breaks down the total for each of the world’s major banks.
http://www.ft.com/cms/s/0/e75aedae-20fe-11dd-a0e6-000077b07658,dwp_uuid=ffa475a0-f3ff-11dc-aaad-0000779fd2ac.html
o MBIA, the world’s largest bond insurer, announces a $2.4 billion loss as a result of write downs on derivative contracts (credit default
swaps) caused by the deteriorating credit market.
o The loss was more than twice analysts estimates.
o MBIA’s stock has lost more than 80% of its value in the past year.
http://www.ft.com/cms/s/0/01fd4dc8-2087-11dd-80b4-000077b07658.html
o A survey by NTC Economics showed confidence among the European Sector has tumbled to the lowest levels since the survey began in
2006.
o The main reason for the pessimism given by the survey participants was the increase in the cost of credit caused by the credit crunch
which would make carrying on business more expensive.
http://www.ft.com/cms/s/0/8e6ef13a-210e-11dd-a0e6-000077b07658.html
• May 14, 2008:
o The Office of Federal Housing Enterprise Oversight announced it would lower surcharges on Freddie Mac’s regulatory capital
requirements after Freddie’s announcement that it will raise $5.5 billion in capital.
o This was the governments first offer of help to Freddy Mac and Fannie Mae which as the Senate Banking Committee put it were “thinly
capitalized, highly leveraged, and pose a systemic risk to taxpayers.”
o Freddy Macs shares rose 9% with the announcement.
http://www.ft.com/cms/s/0/adb1dbdc-21ab-11dd-a50a-000077b07658.html
http://www.ft.com/cms/s/0/8fc077fe-2215-11dd-a50a-000077b07658.html
o A report by Fitch Ratings says that banks have written off 80% of their subprime losses.
o Fitch estimates that total losses on subprime mortgages and CDOs could reach $400 billion.
http://www.ft.com/cms/s/0/783b044a-21e4-11dd-a50a-000077b07658.html
• May 15, 2008:
o Barclays announces a £1 billion credit write down.

o The UK bank also confirmed profits in the first quarter would be below last year’s but did not disclose the numbers.
• May 16, 2008:
o The Federal Reserve Bank is planning on revisiting its hand-off monetary policy approach to asset bubbles after the housing market
crash.
o The Fed has consistently argued that central banks have little power to stop asset bubbles from inflating and then bursting through
monetary policy.
o Ben Bernanke, the current Fed chairman, believes that asset bubbles can be controlled much better through regulation than monetary
policy.
o There are two criticisms of the Fed’s laissez faire approach to asset bubbles: 1) this approach results in a bias in monetary policy that
will ultimately result in higher inflation, and 2) besides creating misleading price signals, bubbles also can cause extreme
macroeconomic volatility and therefore central banks should do anything in their power to prevent them.
o In defense of the wait and see approach are two problems set out by Alan Greenspan and Mr. Bernanke in 2002: 1) bubbles in practice
are almost impossible to identify until they burst, and 2) even if central banks were capable of identifying bubbles, monetary policy is
too blunt to prevent the bubble from inflating without negative effects on the whole economy.
http://www.ft.com/cms/s/0/5c7129e6-22a8-11dd-93a9-000077b07658.html
o One of the Fed’s governors, Frederic Miskin, believes the Fed should use its regulatory powers aggressively and proactively to prevent
asset bubbles in the future.
o Ben Bernanke is currently re-evaluating all the evidence of the last two major asset bubbles to see if there is a better way the Fed could
have reacted to prevent the devastation that occurred after the bubbles burst.
http://www.ft.com/cms/s/0/f6f328d8-22e0-11dd-93a9-000077b07658.html
o The University of Michigan’s consumer confidence index plummets to its lowest level in twenty-eight years.
o The drop is blamed on higher food and energy costs combined with the loss of confidence in the financial markets.
http://www.ft.com/cms/s/0/ac1d4cf0-2347-11dd-b214-000077b07658.html
• May 21, 2008:
o A Financial Times investigation uncovered that Moody’s awarded an incorrect AAA rating to billions of dollars of complex debt
products.
o This was caused by a computer coding error and top executives knew about the problem in early 2007 but it was not fixed (ratings
downgraded) until January 2008.
o Moody’s has said that they are investigating the matter.
http://www.ft.com/cms/s/0/f5ac406a-26d0-11dd-9c95-000077b07658.html
o The glitch was significant because most high powered investors require 2 AAA ratings before investing and Moody’s provided the
second rating after Standard and Poors.
o The numbers showed that the CPDOs should have never received a AAA rating and the corrected rating could drop them up to four
rating notches.
http://www.ft.com/cms/s/0/245bf02e-264d-11dd-9c95-000077b07658.html
o Moody’s Investors Service cuts a French bond insurer, CIFG, from A1 to Ba2 amid worries of its increased write downs on CDOs
backed by risky mortgages.
o This downgrade could possibly put CIFG in violation of its regulatory capital requirements potentially leading to insolvency.
http://www.ft.com/cms/s/0/69defbd6-277f-11dd-b7cb-000077b07658.html
• May 22, 2008:
o Moody’s announces investigation and declares that up to $4 billion of complex debt products were incorrectly rated AAA because of
faulty computer models.
o New York Senator, Charles Schumer, calls the SEC to investigate the matter
o Moody’s stock price falls 16% since the previous day’s announcement.
http://www.ft.com/cms/s/0/721b66de-279a-11dd-b7cb-000077b07658.html
o The Institute of International Finance (an alliance of 300-plus companies including banks) propose accounting rules that allow banks
who have not written off their bad debt to cushion the blow by using historical rather than market prices.
o The Proposal also allows banks to sell assets after 2 years instead of holding until maturity.
o Bank of America analysts say that financial companies have been hit with over $300 billion in write downs and had to raise more than
$260 billion from outside investors.
o The Financial Accounting Standards Board and the International Accounting Standards Board did not support the proposal and said it
would be dangerous to change the rules at a time when transparency was imperative.
http://www.ft.com/cms/s/0/f03237ba-2799-11dd-b7cb-000077b07658.html
o The Financial Services Authority, the UK regulator, said that it will factor in remuneration structures when considering the overall risk
posed by a financial institution.
o The FSA’s stance was that banker pay structures cause more risk to the financial institution.
o The Basel II Accord contains mechanisms that enable regulators to impose additional capital charges for incentive structures that
promote risky behavior.
o The new proposals for risk-adjusted performance targets are supported by the Institute of International Finance.
o Individual banks are hesitant to act for fear of losing top executives to the competition.
http://www.ft.com/cms/s/0/5905b5cc-279b-11dd-b7cb-000077b07658.html
o UBS announces deeply discounted rights issue to stockholders to raise $15.5 billion to boost capital ratios.
o This capital is needed to cover the $19 billion in write downs UBS incurred in the first quarter of 2008.
http://www.ft.com/cms/s/0/2daf964e-281e-11dd-8f1e-000077b07658.html
• May 25, 2008:
o The International Accounting Standards Board sends out invitations to bankers and regulators to form a new working group to look into
the problems of valuing securities in an illiquid market.
o The current model of “fair value” accounting has caused banks to write off more than $300 billion of bad debt.
o Critics of the “fair value” method believe that the debt will be written back up when the markets rebound and this swing is contributing
to the lack of confidence in the financial markets.
o The first series of meetings is scheduled to be held in London on June 13 to discuss the scope of the project.
http://www.ft.com/cms/s/0/4fbb41e6-2a82-11dd-b40b-000077b07658.html
• May 29, 2008:
o The acquisition of Bear Stearns is completed by JPMC as shareholders voted to approve the acquisition.
o The final price was $10 per share paid by JPMC for Bear Stearns stock.
http://www.ft.com/cms/s/0/e2206ed2-f380-11dc-b6bc-0000779fd2ac.html
• June 4, 2008:
o Moody’s announces it will examine MBIA and Ambac, the two largest bond insurers, for a possible downgrade from their AAA rating.
o Moody’s said the ratings were likely to drop to AA.
http://www.ft.com/cms/s/0/cf07a322-3270-11dd-9b87-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
• June 5, 2008:
o NY Attorney General, Andrew Cuomo announces rating agency reform agreements with S & P, Moody’s, and Fitch.
o The agreement contains six areas of reform: 1) Fee Reforms—establishing a fee-for-service structure instead of getting fees only if they
are selected to rate the residential mortgage-backed security (RMBS), 2) Disclosure Reforms—disclose information to investors if an
investment bank submitted material for rating but then decided not to go with a certain company’s rating, 3) Loan
Originator Review—rating agencies will review individual mortgage lenders as well as their loan origination process, 4) Due Diligence
Reforms—agencies will create due diligence criteria and list this on their website, 5) Credit Agency Independence—agencies will
review RMBS policies yearly to ensure independence, and 6) Representations and Warranties—agencies will require warranties from
investment bank for loans underlying RMBS.
http://www.oag.state.ny.us/press/2008/june/june5a_08.html
• June 6, 2008:
o S&P cuts the AAA rating of the two largest bond insurers, MBIA and Ambac.
o The reason stated is that further deterioration of the US mortgage markets and the collateralized debt obligations insured by the
monolines will lead to strains on capital adequacy requirements.
o The monolines were downgraded two notches from AAA to AA.
http://www.ft.com/cms/s/0/d36c447c-33b5-11dd-869b-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
o The Wall Street Journal reports that National City has entered into a memorandum of understanding with the Office of the Comptroller
of Currency putting the bank on probation.
o The agreement is entered into with regulators and details are not publicly disclosed giving the bank an opportunity to work out financial
problems without triggering concern among depositors.
http://www.reuters.com/article/businessNews/idUSBNG8846820080606
• June 10, 2008:
o Banks could face further write downs of $10 billion because of the ratings downgrade of MBIA and Ambac.
o Citigroup, Merrill Lynch, and UBS had the most exposure to the monolines.
http://www.ft.com/cms/s/0/8051c0c4-3715-11dd-bc1c-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
• June 13, 2008:
o Following behind Moody’s last month, S&P announces errors in rating models.
o The credit rating agency said that an error was found in the computer models that rated the complex debt products but the glitch did not
affect the ratings of the debt.
o The disclosure followed an inquiry by the SEC.
http://www.ft.com/cms/s/0/3577c7e0-396f-11dd-90d7-0000779fd2ac.html
• June 16, 2008:
o The SEC announces plans to overhaul the credit rating agency regulation to increase competition and remove the conflict of interests
between the agencies and the investment banks.
o The plans include not allowing credit rating agencies to rate securities that they help design.
o The plans would also include increasing the disclosure of the methods used by credit rating agencies in which 9 firms now dominate the
market.
o The disclosure requirements will also require the agencies to flag complex securities that could be more risky to investors than corporate
bonds.
o The SEC estimates the cost could run more than $130 million a year for the agencies to comply with the disclosure requirements.
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080616/REG/641302622
o Lehman Brothers reports a $2.8 billion second quarter loss marking the first loss in the company’s 14 year history under public
ownership.
o The bank said it had reduced its residential mortgage holdings by 31% since the first quarter to a total of $14.3 billion.
o The loss led to the removal of Lehman’s president, Joe Gregory, and the CFO, Erin Callan.
http://www.ft.com/cms/s/0/50a84d4c-3b99-11dd-9cb2-0000779fd2ac.html
• June 19, 2008:
o Former Bear Stearns hedge fund managers were arrested, bringing about the first criminal charges in the credit crisis.
o Ralph Ciofi and Matthew Tannin were the managers of two hedge funds that bet on subprime mortgages and collapsed in July 2007.
o The charges included securities fraud and insider trading.
http://www.ft.com/cms/s/0/6d49fcf0-3da3-11dd-bbb5-0000779fd2ac.html
http://www.ft.com/cms/s/0/99d923c6-3e62-11dd-b16d-0000779fd2ac.html
o Along with the Bear Stearns hedge fund managers, the FBI announces the crackdown on suspect mortgage practices yielded 406
defendants being charged in 144 cases.
o The FBI coined the sting as “Operation Malicious Mortgage” and targeted anyone involved in fraudulent mortgage loans that involved
roughly $1 billion in losses.
http://www.ft.com/cms/s/0/182b2ede-3e42-11dd-b16d-0000779fd2ac.html
• June 22, 2008:
o Bond insurers such as Ambac and MBIA are talking to banks about wiping out $125 billion of insurance on the complex financial
instruments.
o The talks center around credit default swaps (CDS) insured by the bond insurers to guarantee collateralized debt obligations and
complex debt securities backed by mortgages.
o The banks with the largest exposure such as Citibank, Merrill Lynch, and UBS have already taken write downs due to the lower credit
ratings of the insurers.
http://www.ft.com/cms/s/0/836c7afc-4083-11dd-bd48-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
• June 23, 2008:
o Dexia provides a $5 million credit line for its US bond insurance division.
o This is in response to a N.Y. hedge fund betting against the insurance division’s liquidity.
o The credit line will last for five years and is unsecured by collateral.
http://www.ft.com/cms/s/0/6ce312b6-40ef-11dd-9661-0000779fd2ac,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
• June 25, 2008:
o Barclays announces a £4.5 billion shares issue to boost its capital ratios which are some of the lowest in Europe.
o The Qatar Investment Authority, a sovereign wealth fund, and Hamad bin Jassim Bin Jaber Al Thani, the chairman of Qatar Holding
will finance half of the offering.
http://www.ft.com/cms/s/0/ccc2be62-4283-11dd-81d0-0000779fd2ac.html
o Countrywide shareholders vote to approve the attempted takeover by Bank of America.

o The US Federal Reserve had already approved the deal on June 6, , 2008.
http://www.ft.com/cms/s/0/180eee18-4306-11dd-81d0-0000779fd2ac.html
http://news.xinhuanet.com/english/2008-06/06/content_8319617.htm
• June 26, 2008:
o The SEC announces it will attempt to reduce its own reliance on credit ratings.
o The SEC is recommending that explicit references to credit ratings be dropped from their market rules in which the SEC found 44
references to credit ratings.
o SEC chairman, Christopher Cox, stated that some of the SEC regulations implicitly assume that securities with high credit ratings are
liquid and have lower price volatility which has been proved wrong by the credit crisis.
http://www.ft.com/cms/s/0/fd5658a0-4318-11dd-81d0-0000779fd2ac.html
• July 1, 2008:
o The Treasury in England announces new legislation covering financial stability, failing banks, and depositor protection in an attempt to
avoid another Northern Rock situation.
o The new guarantee scheme raises the deposits covered from £35,000 to £50,000.
o The Treasury, Bank of England, and Financial Services Authority are hoping the higher protection will prevent any runs on the banks.
http://www.ft.com/cms/s/0/3aa01c78-4760-11dd-93ca-000077b07658.html
• July 2, 2008:
o In a speech to the Chatham House in the UK, US Secretary of the Treasury, Henry Paulson, warned companies that they couldn’t
depend on a government bailout if their bets go badly.
o Mr. Paulson also said that regulators need more authority to step in and liquidate investment banks to limit temporary disruptions
similar to what the FDIC has over deposit banks.
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aAsOy1NUvRPw
http://www.treas.gov/press/releases/hp1064.htm
• July 4, 2008:
o The Financial Services Authority (FSA) of the UK sets up a rescue plan for mortgage lender Bradford & Bingley (B&B) after TPG
Capital, a US private equity group, pulled out of a deal to invest £179 million.
o TPG walked away after a ratings downgrade from Moody’s has made B&B one of the lowest rated out of any of the large European
banks.
o Once TPG walked away, the FSA scrambled to find four private institutions willing to step into the shoes of TPG and provide the
necessary funding.
http://www.ft.com/cms/s/0/476a1f5e-4a02-11dd-891a-000077b07658.html
• July 7, 2008:
o The word “subprime” is officially added to the English language as Merriam-Webster Inc. adds it to the new edition of the collegiate
dictionary.
o Webster defines subprime as “1: having or being an interest rate that is higher than a prime rate and is extended especially to low-
income borrowers; 2: extending or obtaining a subprime loan.”
o Merriam-Webster first found the word subprime used in a English language publication in 1995.
http://www.boston.com/news/local/massachusetts/articles/2008/07/07/new_words_in_the_merriam_webster_dictionary/
• July 8, 2008:
o Shares in Fannie Mae and Freddie Mac plunged around 20% as investors sell off their shares.
o The cause was a report by a Lehman Brothers analyst who said that the government backed mortgage financers could be forced to raise
up to $75 billion in fresh capital because of accounting changes.
o The analyst, Bruce Harting, said that the changes under discussion by the Federal Accounting Standards Board (FASB) could force
Freddie and Fannie to bring securitized mortgages back onto their balance sheets resulting in a total of $75 billion in regulatory capital
charges.
o Lehman said they believed that Fannie and Freddie would be exempt from the accounting change but investors still sold off.
http://www.ft.com/cms/s/0/69066b72-4c87-11dd-96bb-000077b07658.html
o The SEC says credit rating agencies failed to manage conflicts of interest in assigning ratings to the complex financial instruments
backed by subprime mortgages.
o The findings of the SEC probe follow months of examinations to determine whether the rating agencies diverged from their usual
procedures to publish higher ratings for complex financial products.
o The SEC chairman, Christopher Cox, said that the volume of rating requests caused employees to cut corners in rating the complex
securities.
http://www.ft.com/cms/s/0/1d0ea8a8-4c80-11dd-96bb-000077b07658,dwp_uuid=5fd271ee-61f6-11dc-bdf6-0000779fd2ac.html
• July 9, 2008:
o EU finance ministers approve moves to impose more stringent regulation on credit rating agencies.
o The ministers support plans by EU internal market commissioner Charlie McCreevy to require the credit agencies, who want to operate
in the EU, to register with EU regulators for strengthened overview.
o Dutch Finance Minister, Wouter Bos said the credit rating agencies were the cause of the current credit crisis and needed more
transparency.
http://www.guardian.co.uk/world/2008/jul/09/eu.creditcrunch
http://uk.reuters.com/article/mediaNews/idUKL0852772820080708
• July 10, 2008:
o Mark Clare, chief executive of Barrat Developments (one of the UK’s largest housebuilders) warns that job cuts in the sector could
reach 60,000 of the 300,000 employees employed directly and indirectly in the housebuilding sector.
o Barrat announced it would cut 1,200 out of its 6,700 employees.
o On the same day, Halifax, a UK mortgage lender, said housing prices were 6.1% lower in June than a year ago.
http://www.ft.com/cms/s/0/985e76ba-4eb4-11dd-ba7c-000077b07658,dwp_uuid=18a58248-385b-11dd-8aed-0000779fd2ac.html
• July 12, 2008:
o IndyMac bank closes down after being unable to meet demands for withdrawals by customers.
o The bank, with assets of $32 billion, becomes the second largest US financial institution to close down, ranking behind Continental
Illinois National Bank & Trust Company which closed down in 1984 with $40 billion in assets.
o The bank’s operations have been transferred to the Federal Deposit Insurance Corporation (FDIC), which insures depositors for up to
$100,000 in deposits.
o The FDIC is estimating the rescue will cost between $4 to $8 billion.
o New York Senator, Charles Schumer, blamed the Office of Thrift Supervision (OTS) for the failure to recognize IndyMac’s risky
lending practices. OTS was the bank’s main regulator.
http://www.ft.com/cms/s/0/8eca3530-4f9f-11dd-b050-000077b07658,dwp_uuid=698e638e-e39a-11dc-8799-0000779fd2ac.html
• July 13, 2008:
o Investor speculation on the Freddie Mac and Fannie Mae bailout worsen the situation.
o Investors (including large hedge funds) employ the “take-under” strategy which includes short selling the stock, causing the shares to fall
further and investing the proceeds in the company’s debt.
o These investors believe that the government will allow the companies to fail but then bail out the debt holders to protect the financial
market.
http://www.ft.com/cms/s/0/921217f2-510d-11dd-b751-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html
o The US Treasury and Federal Reserve release a roadmap on how to protect Freddie Mac and Fannie Mae from insolvency.
o Because of their need for short-term financing, the mortgage companies are largely vulnerable to a sudden loss of market confidence in
carrying out their day to day business.
o Although the government did not announce a detailed bail out package, they made it clear that they will provide a liquidity backstop if
needed.
o The Treasury also conceded that this may include an large injection of public funds.
http://www.ft.com/cms/s/0/898e6482-510d-11dd-b751-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html
• July 14, 2008:
o More details surface about the rescue plan to save Freddie Mac and Fannie Mae proposed by Henry Paulson.
o The government said that it will approach Congress for the authority to give unlimited funds to make sure that Fannie Mae and Freddie
Mac do not fail.
o The Federal Reserve announced it will provide Freddie and Fannie emergency funds on the same terms as banks should it become
necessary.
o Mr. Paulson outlined a three point plan to resolve the crisis at the ailing mortgage lenders: 1) the Treasury will be authorized to increase
the current $2.25 billion lines of credit to Freddie and Fannie, 2) the Treasury will have the power to purchase equity in the companies
if necessary, and 3) the entities will have access to borrowing from the Fed’s discount window. All three are at the discretion of the
Treasury Secretary.
http://www.ft.com/cms/s/0/5773a770-5106-11dd-b751-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html
• July 15, 2008:
o In an effort to prevent bankruptcy and get paid, trading partners with ACA Capital enter into the sixth “forbearance agreement”.
o The insolvent bond insurer received an August 11 deadline to pay claims on CDOs.
o The original “forbearance agreement” was entered into on January 21.
http://www.marketwatch.com/news/story/aca-capital-enters-sixth-forbearance/story.aspx?guid=%7BC243B64E-FCB9-4437-97F7-
3745B1D7A526%7D&dist=hppr
• July 16, 2008:
o Wells Fargo, the fifth largest US bank, reports better than expected second quarter earnings.
o Net income rose to 53 cents per share beating estimates of 49 cents per share.
o Despite falling earnings, the bank has managed to remain profitable during the credit crisis and actually increased its dividend by 10%.
o Write offs totaled $1.51 billion for the second quarter.
http://www.ft.com/cms/s/0/4948bc66-5350-11dd-8dd2-000077b07658.html
http://www.reuters.com/article/businessNews/idUSWNAB088120080716?pageNumber=2&virtualBrandChannel=0
o One of Spain’s largest property companies, Martinsa-Fadesa, files for bankruptcy.

o The company decided to file for bankruptcy after failing to raise equity needed to complete a €4 billion debt refinancing with banks.
o It is unknown the specific amount of write downs that will follow because of loan exposure by Spanish banks but the largest Spanish
bank, La Caixa, announced it had already set aside €192 million to cover its €700 million exposure.
http://www.ft.com/cms/s/0/7defd5f6-52d0-11dd-9ba7-000077b07658.html
• July 17, 2008:
o Richard Holbrooke, a director at the American International Group (AIG), resigns.

o AIG was looking to bring in a new team after two straight quarters of financial losses due to their exposure to credit default swaps.
http://www.marketwatch.com/news/story/american-international-group-director-holbrooke/story.aspx?guid=%7BA04055AA-E762-4C2B-
BA63-488AD0BA152F%7D&dist=hpts
http://www.bloomberg.com/apps/news?pid=20601203&sid=aIpUxO6Q1EoQ&refer=insurance
o Merrill Lynch (ML) announces write downs of $9.4 billion primarily on its mortgage related assets and hedges with troubled bond
insurers.
o ML still has $50 billion in collateralized debt obligations, subprime mortgages, and real estate assets that could lead to further write
downs in the future.
o ML has had a tough year posting a loss of almost $19 billion in the last four quarters including the $4.6 billion loss in the second
quarter.
o Along with reporting the loss, ML also announced a sell off of $8 billion in assets to raise much needed capital.
http://www.ft.com/cms/s/1/fa85e88e-543e-11dd-aa78-000077b07658.html
http://www.ft.com/cms/s/0/2a609bac-543b-11dd-aa78-000077b07658.html
o JP Morgan Chase announces stronger than expected earnings despite $2.4 billion in write downs in the second quarter of 2008.
o JPMC posted a net income of $2 billion or 54 cents a share compared to analysts expectations of 44 cents a share.
o This is compared to the $1.20 a share income posted for the same period last year.
http://www.ft.com/cms/s/0/81c96f6a-53f3-11dd-aa78-000077b07658.html
o Goldman Sachs announces earnings of $2.1 billion, well ahead of analyst expectations.
o Goldman reported losses of $775 million on non-investment grade credit origination along with gains in equity underwriting and
security services.
http://www.ft.com/cms/s/0/54ec522a-3c68-11dd-b958-0000779fd2ac.html
• July 19, 2008:
o Citigroup announces better than expected earnings for the second quarter of 2008.
o Citigroup announced losses of $2.5 billion after second quarter write downs of $7.2 billion in bad debt.
o This is significantly better than the analysts thought as they predicted $3.67 billion in losses.
o Citigroup shares jumped 7.7% on the news.
http://www.ft.com/cms/s/0/4dd5433c-5529-11dd-ae9c-000077b07658.html
• July 20, 2008:

o Financial Times reports that the SEC approved registering the proposed $5.5 billion stock offering by Freddie Mac.
o David Nason, a US treasury official, praised Freddie Mac in its efforts to raise capital from private sources after the government
proposed a bail out plan.
http://www.ft.com/cms/s/0/280b6afc-5694-11dd-8686-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html
• July 21, 2008:
o Bank of America (BofA) announces better than expected second quarter earnings.
o BofA earnings were 72 cents a share compared to the analysts expectations of 52 cents per share, still 41% lower than last year.
o Write offs totaled $3.6 billion for BofA in the second quarter
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=ACBJ&date=20080721&id=8918617
• July 22, 2008:
o Federal researchers say that the Freddie Mac and Fannie Mae bail out plans proposed by the government could cost the taxpayers up to
$25 billion.
o The fiscal impact report prepared by the Congressional Budget Office stated there was a 50% chance that the US would not have to bail
out Freddie and Fannie in the next 18 months but there is also a 5% chance that the treasury would have to cover $100 billion in losses
if the mortgage market keeps getting worse.
o US mortgage rates reach their highest levels in a year on speculation that Freddie and Fannie will cut back their purchases of home
loans and mortgage securities.
http://www.ft.com/cms/s/0/e4d3806c-5814-11dd-b02f-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html
o Wachovia declares an $8.9 billion dollar loss in the second quarter of 2008.
o The loss was the largest in company history and marks the first time for losses in consecutive quarter.
http://www.ft.com/cms/s/0/34e70006-57ed-11dd-b02f-000077b07658,dwp_uuid=ffa475a0-f3ff-11dc-aaad-0000779fd2ac.html
• July 23, 2008:
o The US House of Representatives passed a housing bill which contained a rescue plan for Freddie Mac and Fannie Mae along with
giving the government power to guarantee up to $300 billion in mortgages refinanced through the Federal Housing Administration.
o Bush and the White House originally threatened to veto the bill because of the potential cost to taxpayers but changed stances in order
to get a Freddie and Fannie rescue plan through Congress and into law.
http://www.ft.com/cms/s/0/2ac82632-58b9-11dd-a093-000077b07658,dwp_uuid=5db90a0e-4e6c-11dd-ba7c-000077b07658.html
o The Basel Committee on Banking Supervision proposes rules to change a regulatory loophole that allowed banks to own complex assets
that helped exacerbate the credit crisis.
o The proposed incremental risk charge (IRC) would make it more costly for banks to hold these structured debt products.
o SEC chairman, Christopher Cox, said the IRC would also apply to investment banks.
http://www.ft.com/cms/s/0/acc466a8-5848-11dd-b02f-000077b07658.html
o Northern Rock, the troubled British mortgage company that was nationalized by the British government in February, hires Gary
Hoffman as its new chief executive.
o Mr. Hoffman, a former Barclays director, replaces the current chief, Andy Kuipers.
http://www.ft.com/cms/s/0/2e02ebfc-58aa-11dd-a093-000077b07658,dwp_uuid=74d73d92-650f-11dc-bf89-0000779fd2ac.html
• July 24, 2008:
o Andrew Cuomo, the N.Y. State Attorney General files charges against UBS senior officials for selling more than $21 million of their
personal holdings of auction-rate securities and falsely marketing them as safe and liquid.
o The auction-rate security market started faltering in February as dealers stopped taking the unsold securities in the auctions they
managed.
http://www.ft.com/cms/s/0/0fbf2a3e-59b8-11dd-90f8-000077b07658,dwp_uuid=eddfd4e0-4bc3-11da-997b-0000779e2340.html
• July 26, 2008:
o Washington Mutual announces a $10 billion capital infusion to its balance sheet to try to stop speculation over its financial health.
o The money was borrowed from the Fed’s discount window, the Federal Home Loan Banking System, and open market operations.
http://www.ft.com/cms/s/0/47d815de-5a9e-11dd-bf96-000077b07658.html
• July 27, 2008:
o Alistair Darling, the UK Chancellor, considers extending the Bank of England’s mortgage plan where high quality mortgage backed
securities are exchanged for government bonds.
o Mr. Darling said this will inject capital into the ailing credit markets and providing government financing should increase the volume of
lending along with driving borrowing costs down.
o The current scheme applies only to mortgage assets held at the end of 2007; extending it to new mortgages would hopefully boost the
housing market.
http://www.ft.com/cms/s/0/3f6ecf00-5c0b-11dd-9e99-000077b07658.html
• July 28, 2008:
o Merrill Lynch announces an $8.5 billion share offering to help cover the $5.7 billion fire sale of toxic mortgage securities.
o At the end of the second quarter, ML had estimated the value of these CDOs at $11.1 billion but ended up selling to Lone Star Funds
for $6.7 billion.
http://www.ft.com/cms/s/0/3bf7930e-5cf4-11dd-8d38-000077b07658.html
o Research by the Financial Services Authority of the UK reveals that financial education is unlikely to lead to better outcomes.
o The research comes out two years into a £90 million five year program to make Britons more financially capable.
o Overall the research showed little evidence that the financial education programs changed student behavior.
http://www.ft.com/cms/s/0/9a1b132a-5c31-11dd-9e99-000077b07658.html
• July 29, 2008:
o US home prices drop 15.8% in May according to Standard & Poor’s index reports.
o This is the steepest one month drop since the index was started eight years ago—eclipsing the 15.3% drop in April.
http://www.ft.com/cms/s/0/50694c38-5d71-11dd-8129-000077b07658.html
o Trade partners of SCA, an insolvent bond insurer, agree to drop their claims for cash to allow the monoline to avoid being taken over by
the US insurance regulator.
o One of the trade partners, Merrill Lynch, agreed to throw away its $3.5 billion in insurance claims for $500 million in cash.
o 13 other banks entered into negotiations to drop their claims in exchange for cash.
http://www.ft.com/cms/s/0/9310db1e-5d94-11dd-8129-000077b07658,dwp_uuid=b6abe56e-d0c2-11dc-953a-0000779fd2ac.html
• July 30, 2008:
o The Fed announces it will provide extra liquidity support for primary dealers.
o The support includes; 1) 3-month cash loans to banks, 2) a new auction facility, and 3) extended access for investment banks and other
primary dealers to emergency cash and loans of treasury securities until January 30.
http://www.ft.com/cms/s/0/a9dba646-5e41-11dd-b354-000077b07658,dwp_uuid=4034778a-37aa-11dd-aabb-0000779fd2ac.html
o The SEC extends the ban on “naked short-selling” until August 12.
o This technique allows investors to bet on a stock falling without having to pay interest and can lead to increased speculation.
o The ban included “naked short-selling” on Fannie Mae, Freddy Mac, and 17 large bank stocks to help stabilize their share price.
http://www.ft.com/cms/s/0/608f5210-5dee-11dd-8129-000077b07658.html
• July 31, 2008:
o Deutsche Bank reveals more write downs bringing the total so far to $7.8 billion for this year.
o The write downs included €1 billion on residential mortgage-backed securities, €500 million relating to monoline insurers, and €300
million in commercial real-estate.
o Without figuring in the write downs, Deutsche corporate banking and securities division would have an income 16% less than the
second quarter of last year.
http://www.ft.com/cms/s/0/2e3720ee-5ec6-11dd-91c0-000077b07658.html
o The European Commission (EC) outlines a plan to reform ratings agencies.

o The EC said that the rating agencies should be subject to a single supervisory regime in order to operate in Europe.
o The 12 recommendations of the Securities Industry and Financial Markets Association taskforce focus on better disclosure and
transparency for the industry and are meant to combat the failures of the current system of voluntary self-regulation.
http://www.ft.com/cms/s/0/1ccdc27c-5f2f-11dd-91c0-000077b07658,dwp_uuid=5fd271ee-61f6-11dc-bdf6-0000779fd2ac.html
o An 80 page complaint by Massachusetts’s Secretary of State, William Galvin, accuses Merrill Lynch of fraud in their selling techniques
of auction-rate securities (ARS).
o The complaint claimed that research analysts were being censored to not warn possible investors of the risks of ARS while the company
was aggressively selling them.
http://www.ft.com/cms/s/0/cc6768f8-5f4a-11dd-91c0-000077b07658.html
o Nationwide Building Society in the UK releases data showing a drop in monthly housing prices of 8.1% compared to July of last year.
o This is the fastest decline since Nationwide started keeping monthly figures in 1991, significantly more than the 6.3% recorded in June.
o With housing demand low, more stringent requirements being applied to mortgage applicants, and wholesale funding scarce and
expensive, the estimates are that housing prices will continue to decline in the foreseeable future.
http://www.ft.com/cms/s/0/937290bc-5ec9-11dd-91c0-000077b07658.html
• August 1, 2008:
o The Federal Deposit Insurance Corporation (FDIC) issues cease and desist orders to four small US banks.
o The fours banks were: 1) MetroPacific Bank in Irvine, CA, 2) Bank Haven in Haven, KS, 3) Clarkston State Bank in Clarkson, MI, and
4) Hastings State Bank in Hastings, NE.
o The FDIC said the banks need to raise more capital, expand their loss allowances, and better oversee and diversify their loan portfolios
to prevent bankruptcy.
http://www.ft.com/cms/s/0/f52c86b4-6018-11dd-805e-000077b07658.html
• August 4, 2008:
o David Aufhauser resigns as general counsel to UBS’s investment banking division.

o The N.Y. Attorney General, Andrew Cuomo, accused him along with other top level UBS officials as selling their personal holdings in
auction rate securities on insider information.
http://www.ft.com/cms/s/0/0ab60a76-6255-11dd-9ff9-000077b07658.html
o HSBC, a UK bank, cautions that the credit crisis is starting to leak over into Asia.
o HSBC’s chairman, Stephen Green, said that the bank was beginning to see signs of slowdowns in India and Vietnam.
http://www.ft.com/cms/s/0/a168f158-620b-11dd-9ff9-000077b07658.html
• August 5, 2008:
o Northern Rock, the British nationalized mortgage lender, is expected to report first half losses of $500 million.
o Most of these losses are tied to bad debts in its UK mortgage book.
o This far exceeds the $199 million loss reported for all of 2007.
http://www.ft.com/cms/s/0/d6e44576-6279-11dd-9a1e-000077b07658.html
o Investors express concern over the government taking on £3.4 billion in extra risk to help bail out Northern Rock.
o The bank said it was swapping £3 billion of its Bank of England debt and 400 million of preference shares for equity.
o This debt-for-equity swap means that investors will get the £3.4 billion back only if Northern Rock is sold into the private sector or if
the bank repatriates excess capital.
o Northern Rock announced it has reduced its original Bank of England loan from £26.9 billion to £17.5 billion.
http://www.ft.com/cms/s/0/74841f04-627f-11dd-9a1e-000077b07658,dwp_uuid=74d73d92-650f-11dc-bf89-0000779fd2ac.html
• August 6, 2008:
o In response to the credit crisis, some of the world’s largest banks propose reforms that would limit the size and scope of their business.
o Headed by Gerald Corrigan, managing director of Goldman Sachs, the study was backed by JP Morgan Chase, Merrill Lynch,
Citigroup, HSBC, Lehman Brothers, and Morgan Stanley.
o The proposals will limit the number of investors who can buy complex financial products, bring more derivative instruments into
regulator’s sights, and call on the banks to spend more money on technology and risk management.
o Under the proposal, only highly sophisticated investors would be able to purchase complex financial products such as auction rate
securities.
http://www.ft.com/cms/s/0/94dc3528-63c6-11dd-844f-0000779fd18c.html
• August 7, 2008:
o UK housing prices fell 11% from January to July 2008.

o Compared to last year, the house prices were 10.9% lower, which is the first double digit monthly drop, year-on-year, in the history of
the Halifax House Pricing Index.
http://www.ft.com/cms/s/0/cdc05c4c-6458-11dd-af61-0000779fd18c.html
o AIG shares drop 19.1%, its biggest daily drop in 39 years, after announcement of a higher than expected $5.4 billion loss for the second
quarter.
o This loss was blamed on AIG’s exposure to large subprime write downs.
http://www.ft.com/cms/s/0/c5ae859e-647e-11dd-af61-0000779fd18c.html
o Barclays offloads £6.3 billion in troubled loans and securities in a move to transfer the risk of the credit crunch off its balance sheet.
o Sales were consistent with Barclays balance sheet valuations and did not require the bank to provide financing signifying that investors
are willing to buy debt assets affected by the credit crunch.
http://www.ft.com/cms/s/0/b58e46dc-6446-11dd-af61-0000779fd18c,dwp_uuid=bfce0fae-de0b-11dc-9de3-0000779fd2ac.html
• August 8, 2008:
o Fannie Mae announces a $2.3 billion second quarter loss and slashes its dividend.
o The mortgagor said we are experiencing the worse housing market in 70 years that said defaults in July were higher than any other
month in the second quarter.
o Fannie Mae and Freddy Mac owns or guarantees around $5,300 billion in US mortgages.
http://www.ft.com/cms/s/0/9446fdc0-6572-11dd-a352-0000779fd18c.html
o Citigroup and Merrill Lynch agree to buy up to $20 billion in auction-rate securities (ARS).
o ARS are long-term debts issued by municipalities and others whose interest rates are set at bank-backed auctions.
o Citigroup said it would buy back $7.5 billion worth of ARS and Merrill Lynch announced a buyback of up to $12 billion.
o The banks reacted to pressure from regulators who had initiated probes into the stale ARS market.
o The banks that supported the ARS market stopped doing so in February, causing the market to collapse and regulators claim that the
banks that continued to sell ARS misrepresented them as liquid, cash-like instruments.
http://www.ft.com/cms/s/0/a91a4076-64d8-11dd-af61-0000779fd18c.html
http://www.ft.com/cms/s/0/a97b97ac-64a8-11dd-af61-0000779fd18c,dwp_uuid=4da69efc-1b8f-11dd-9e58-0000779fd2ac.html
o The Royal Bank of Scotland announces a £691 million loss, the third largest in UK banking history.
o Any profits were wiped out by the £5.9 billion in write downs linked to subprime US mortgages.
o The bank announced that they were close to replacing three directors and speculators believe this is the first step
in the eventual replacement of CEO, Sir Fred Goodwin.
http://www.ft.com/cms/s/0/7bcfafe0-6512-11dd-a352-0000779fd18c.html
o The Council of Mortgage Lenders releases data showing 19,000 homes repossessed in the UK in the last six months.
o This is a 40% jump from 2007 and the highest level since the mid nineties.
http://www.thisislondon.co.uk/standard/article-23529485-details/19,000+homes+are+repossessed+in+past+six+months/article.do
• August 9, 2008:
o UBS reaches an agreement with regulators to repurchase $19 billion of ARS debt.
o The ARS market was estimated around $330 billion before crashing in February when the banks quit supporting the market.
o The agreement also settles the civil lawsuits brought by the N.Y. Attorney General, Andrew Cuomo, earlier this August against UBS
for misrepresenting the ARS.
http://www.ft.com/cms/s/0/84cae422-656a-11dd-a352-0000779fd18c.html
• August 10, 2008:
o Financial Times reports that the Royal Bank of Scotland is involved in a sale of loans from their balance sheet of $8 billion.
o The buyout is led by Apollo, Blackstone, and TPG—all private equity firms.
o Although the exact percentage is not disclosed, Blackstone’s president, Tony James, reported that the buyers could expect to make up to
30% on the deeply discounted loans.
http://www.ft.com/cms/s/0/1aa1aee4-6710-11dd-808f-0000779fd18c.html
• August 11, 2008:
o N.Y. Attorney General, Andrew Cuomo, rejects Morgan Stanley’s offer to buy back $4.5 billion in auction-rate securities (ARS) as too
little too late.
o The result being that the investigation into Morgan Stanley’s sale practices of ARS will continue with possible lawsuits upcoming.
http://www.ft.com/cms/s/0/538768f6-67d9-11dd-8d3b-0000779fd18c.html
o A Moody’s report shows that UK subprime defaults jump.

o This report shows that the default rate on UK subprime mortgages increased from 7.3% in the second quarter of 2007 to 10% in the
second quarter of 2008.
o UK housing prices have fallen 8.5% so far in 2008 and mortgage lenders predict a 20% drop by the end of 2009.
http://www.ft.com/cms/s/0/2ac04318-67cd-11dd-8d3b-0000779fd18c.html
o Data from the Building Societies Association shows that mortgage repayments outstripped new loans by £700 million in June.
o The Bank of England says this is unprecedented, never before has net lending in the mortgage market been negative.
o This trend shows the extreme conservatism of mortgage lenders in the UK in response to the subprime credit crisis.
http://www.ft.com/cms/s/0/e8be25d2-672e-11dd-808f-0000779fd18c.html
• August 12, 2008:
o UK mortgage broker, Omotayo Fawole, was fined £100,000 for fraud and banned by the Financial Services Authority.
o Mr. Fawole is the 18th broker to be banned by the FSA this year compared to six total for all of last year.
o The FSA findings show that Mr. Fawole overstated earnings and profits in mortgage applications.
http://www.ft.com/cms/s/0/fdfb8352-67fd-11dd-8d3b-0000779fd18c.html
o Banks still remain exposed to risk in the buyout deals to remove risky mortgage assets from their balance sheets.
o This year, banks such as Citigroup, Deutsche Bank, and Royal Bank of Scotland have unloaded between $25-30 billion in bad loans to
three major private equity groups: Apollo, Blackstone, and TPG.
o The deals averaged discounts of 85 cents on the dollar for the loans.
o The banks still retain some of the downside risk on these loans. The deals are structured so the private equity companies are at risk for
the first losses, up to 20 cents on the dollar, but then any additional losses are shared with the banks.
http://www.ft.com/cms/s/0/89610f9a-6892-11dd-a4e5-0000779fd18c.html
o JP Morgan Chase reports a $1.5 billion write down in July.

o Bankers said that July was the worst month for mortgage-backed bonds since the beginning of the subprime crisis.
o JPMC said that the trading conditions of the mortgage market had seriously deteriorated in July from cut-price sales and waning
investor demand.
http://www.ft.com/cms/s/0/5b3f0ea2-67fa-11dd-8d3b-0000779fd18c.html
o Bloomberg reports that total losses related to the failure of the US subprime mortgage market top $500 billion.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8sW0n1Cs1tY&refer=home
• August 13, 2008:
o UK inflation rate exceeds the bank interest rate for the first time in twenty-seven years.
o This is a large warning sign for the Bank of England who will likely respond by raising interest rates to control inflation instead of
lowering them more to ease the credit crunch.
o Britain currently has a negative real interest rate after the Bank of England has been lowering them consistently in response to the
problems the credit crisis has created to the UK financial system.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/13/cncpi113.xml&CMP=ILC-mostviewedbox
o A website keeping track of the “implode-o-meter” shows that 273 major US lending operations have “imploded” since late 2006.
o In addition, eighteen lenders are on the ailing/watch list including Freddie Mac and Fannie Mae.
http://ml-implode.com/
• August 19, 2008:
o Former IMF chief economist, Kenneth Rogoff, warns that the credit crunch may lead to the failure of a large US bank within months.
o Professor Rogoff believes the worse of the credit crisis is yet to come and we will likely see a high-profile casualty among American
banks.
o Mr. Rogoff said the credit crisis will likely lead to consolidation in the US financial sector and Fannie Mae and Freddie Mac will cease
to exist in their present form.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece
• August 20, 2008:
o Lehman Brothers holds secret talks to sell up to 50% of its shares to South Korean or Chinese investors.
o Talks reportedly broke down because Lehman was asking too high of a price.
o Shares in Lehman Brothers have fallen almost 85% since early 2007.
http://www.ft.com/cms/s/0/586ed412-6ee6-11dd-a80a-0000779fd18c.html
• August 27, 2008:
o Bloomberg releases table showing a total of $506.1 billion in asset writedowns and credit losses from the collapse of the US subprime
mortgage market.
o The table also shows that the banks have raised $352.6 billion to cover their writedowns.
o The table breaks down the individual numbers of over fifty banks.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDmQ66OoJbfw
• August 28, 2008:
o Fannie Mae announces a management restructuring plan that would put new executives in charge of its plan to improve capital
management and cut credit losses.
o David Hisey becomes the new CFO and Michael Shaw the new chief risk officer.
http://www.ft.com/cms/s/0/771992dc-748e-11dd-bc91-0000779fd18c.html
o The US government takes control of Freddie Mae and Fannie Mac in what could become the world’s largest financial bail-out.
o The plan included the government injecting $100 billion to ensure the troubled mortgage lenders would be able to meet their debts.
o The government also said it would buy mortgage bonds backed by the companies starting with $5 billion and provide unlimited liquidity
until the end of next year.
o Shares will continue to trade on the two companies but current shareholders will face the prospect of massive dilution.
o To lower future risk to taxpayers, the government will allow Fannie and Freddie to grow up to $850 billion each but starting in 2010
they will be required to shrink their portfolios by 10% a year until they reach $250 billion.
o Currently, Freddie and Fannie have $5,400 billion in outstanding liabilities and guarantee three-quarters of all new US mortgages.
http://www.ft.com/cms/s/0/3a4cb13a-7d04-11dd-8d59-000077b07658.html
o Washington Mutual ousts CEO, Kerry Killinger, and replaces him with Alan Fishman.
o Washington Mutual has had large exposure to the credit crisis and its share price has dropped from $40 to $3 since the summer of 2007.
o Analysts expect Mr. Fishman to look into opportunities to sell the company.
http://www.ft.com/cms/s/0/d46730bc-7da7-11dd-bdbd-000077b07658.html
o Bloomberg News reports that the global slowdown from the subprime mortgage collapse has wiped out more than $17 trillion in global
equity value.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aq8tCTiwjJmY&refer=home
o Fannie Mae sells $7 billion worth of bonds mainly to domestic investors.

o This is its largest syndicated benchmark note ever.
o Fannie paid a risk premium of 70 basis points over comparable Treasuries which is a sharp drop from similar bond sales last month.
o The bonds have a two-year maturity which falls within the timeframe that the US government has explicitly planned to provide a
backstop for both Fannie Mae and Freddie Mac.
http://www.ft.com/cms/s/0/96c2d980-7f5c-11dd-a3da-000077b07658.html
o A study finds plaintiffs filed 607 civil cases tied to the subprime crisis in federal courts during 18 months ending June 2008.
o This compares with the 559 federal cases in six years from the fall-out of the savings and loans crisis of the 1980s.
o A partner at Arnold and Palmer says the trend is even worse because the study does not account for all of the lawsuits being filed in
state courts.
http://www.ft.com/cms/s/0/fbb80348-7f5b-11dd-a3da-000077b07658.html
o The US government takeover of Freddie Mac and Fannie Mae could lead to a default of up to $500 billion in credit default swaps.
o Estimates say these contracts will likely be sold for 95 cents on the dollar resulting in up to $25 billion in losses to the insurance
companies and banks who recently offered protection against a default.
http://www.ft.com/cms/s/0/59477edc-7f5f-11dd-a3da-000077b07658.html
o Lehman Brothers announces plans to shrink its size to survive the credit crisis.
o The plan includes selling off its asset management unit and spinning-off $30 billion of troubled property assets.
o The news came after Lehman reported its worse loss ever of $3.9 billion for the third quarter spurred by $7.8 billion in credit-related
writedowns.
o CEO Dick Fuld told analysts that Lehman was in one of its toughest periods in its 158 year history but would pull through.
http://www.ft.com/cms/s/0/c4cb3b92-7f98-11dd-a3da-000077b07658.html
o Major banks devise a rescue package to buy Lehman Brothers.

o Bank of America is seen as the leading contender and it is considering a joint takeover bid with JC Flowers and China Investment Co.,
the Chinese sovereign wealth fund.
o Both Moody’s and Standard & Poor’s have said they will cut Lehman’s credit ratings if the bank fails to find a buyer, further crippling
Lehman’s ability to raise funds.
http://www.ft.com/cms/s/0/306f879c-812c-11dd-82dd-000077b07658.html
o The US Treasury and Federal Reserve refuse to use public funds to close a rescue for Lehman Brothers.
o Analysts highlight three important differences between the Lehman situation and the government’s bailout of Bear Sterns: 1) Lehman’s
business mix differs from Bear’s, 2) there is less systematic risk with a Lehman’s failure because financial institutions have had six
months to prepare for the failure, and 3) the Fed now has in place an emergency liquidity facility to allow Lehman to wind down
business operations in a way that will not cause shocks to the markets.
http://www.ft.com/cms/s/0/c83d1138-812d-11dd-82dd-000077b07658.html
o Merrill Lynch enters into talks to be acquired by Bank of America.

o This comes after Bank of America removed itself from the bidding for Lehman Brothers because the government refused to supply
financial help.
o People close to the situation say the per share price of Merrill could command a large premium and possible reach $30 (current market
price of $17.05).
o Merrill’s shares have fallen almost 70% this year.
http://www.ft.com/cms/s/0/0ba5fbd8-82a0-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o American International Group (AIG) seeks to raise $10-20 billion in equity from private investors to shore up its balance sheet.
o The private investors include Kohlberg Kravis Roberts, Texas Pacific Group, and JC Flowers.
o AIG also petitioned the Fed to borrow from the discount window to help stabilize its business operations.
o Because of its exposure to the real estate and credit default swaps market, the ratings agencies have threatened to downgrade AIG if it
does not raise the much needed capital.
http://www.ft.com/cms/s/0/ef3a1e16-8286-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o Lehman Brothers announces it will file for Chapter 11 bankruptcy as acquisition talks with Bank of America break down.
o The filing does not include Lehman’s broker-dealer operations, which Lehman is looking into selling.
http://www.ft.com/cms/s/0/52098fa2-82e3-11dd-907e-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o Ten of the world’s largest banks agree to pool $70 billion in a liquidity fund to mitigate the expected failure of Lehman Brothers.
o The ten banks involved are Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase,
Merrill Lynch, Morgan Stanley, and UBS.
o Each of the banks will be able to borrow up to one third of the fund by pledging a wide range of collateral that is not accepted for Fed
loans.
o The Fed also relaxed regulations and said it would allow a broader range of collateral for Fed loans and it will also suspend the rule
that prohibits deposit-taking banks from using deposits to help finance their investment banking subsidiaries until January 30, 2009.
http://www.ft.com/cms/s/0/136a27d8-82d0-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o Bank of America and Merrill Lynch enter into an agreement where Merrill Lynch will be acquired for $50 billion.
o The all stock transaction signaled to the market that investment banks were scrambling to find partners after learning the fate of
competitor Lehman Brothers.
o The offer by Bank of America was 70% higher than Merrill’s stock price at the close on Friday.
http://www.ft.com/cms/s/0/0ba5fbd8-82a0-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o The European Central Bank (ECB) allots €30 billion in one-day liquidity to counter the effects of Lehman Brothers bankruptcy.
o The Bank of England said it would offer £5 billion of extra reserves to help stabilize the markets.
o Both banks said that European banks will now be short of cash because of all the money that the banks lent to Lehman Brothers will
now be tied up in bankruptcy proceedings.
http://www.ft.com/cms/s/0/6e90abdc-82f8-11dd-907e-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o A deal between AIG and New York insurance regulators allows the insurance company to access $20 billion of assets from its
subsidiaries in an attempt to add liquidity and prevent a credit downgrade.
o Despite the deal, all of the major rating agencies downgraded AIG’s long term debt which could trigger billions of dollars in collateral
payments on its derivative trades.
o AIG’s stock price finished down more than 60% on the day.
http://www.ft.com/cms/s/0/abaf3dee-834d-11dd-907e-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o The US Federal Reserve announces it will lend AIG $85 billion in emergency funds.
o The plan includes giving the government control with a 79.9% stake in the company.
o The government said that AIG executives would be replaced and the $85 billion bridge loan would be repaid by selling off assets.
o The government stake was implemented to prevent existing shareholders from benefiting from the bailout.
http://www.ft.com/cms/s/0/271257f2-83f1-11dd-bf00-000077b07658.html
o Trading is suspended on the Russian stock exchanges Micex and RTS.

o This comes after a 20% drop in response to the crisis in the US.
o In an effort to stabilize, the Russian central bank injected $14.16 billion in emergency one-day funds into the money market.
http://www.ft.com/cms/s/0/6ff9306c-83f1-11dd-bf00-000077b07658,dwp_uuid=9170c6b8-7fde-11dd-8eeb-000077b07658.html
o A money market fund managed by Reserve Management Corporation (RMC) has “broken the buck” as its net asset value (NAV) drops
below $1 per share.
o This is the first time since 1994 that this has happened to a money market fund.
o The cause was RMC’s decision to write $785 million held in Lehman Brothers debt down to zero and a large increase in redemptions.
o The NAV finished the day at 97 cents.
http://www.ft.com/cms/s/0/8bcf03ac-84e1-11dd-b148-0000779fd18c.html
o The Financial Services Authority and UK government waive competition rules and spearhead a merger between Lloyds TSP and HBOS.
o Lloyds will takeover HBOS for £12 billion.
o HBOS was the UK’s largest savings institution.
o The government plans to legislate to give the ministers the ability to block any competition inquiry if a merger is deemed to be vital to
maintaining financial stability.
o The merged bank will have around 28% of the mortgage loan market and 50% of the savings market.
http://www.ft.com/cms/s/0/d7fa43e0-8496-11dd-b148-0000779fd18c.html
o Putnam closes a $12 billion money market fund because of increased redemption requests.
o The net asset value of the fund was $1 per share when it was closed.
http://www.ft.com/cms/s/0/55a8e210-85aa-11dd-a1ac-0000779fd18c.html
o Central banks from around the world announce $180 billion emergency injection to provide liquidity and halt the escalating crisis.
o This was in response to the lack of lending between banks that had occurred in the US and UK following the AIG bailout.
http://www.ft.com/cms/s/0/e91b24b6-8557-11dd-a1ac-0000779fd18c.html
o The Russian stock market gains 30% after having trading suspended for two days.
o This was in response to a government pledge of more than $100 billion in liquidity to help the credit squeeze.
o Standard & Poor’s downgraded Russia’s outlook from positive to stable.
http://www.ft.com/cms/s/0/6fadc7ae-8634-11dd-959e-0000779fd18c,dwp_uuid=9170c6b8-7fde-11dd-8eeb-000077b07658.html
o The Financial Services Authority approves ban on the short-selling of financial stocks in the UK.
o The ban will remain in effect until January 16, 2009.
o Short-selling has been blamed for driving down the price on financial shares, contributing to the recent failures.
http://www.ft.com/cms/s/0/3652c4d8-85e3-11dd-a1ac-0000779fd18c.html
o The US Treasury announces it will insure money market funds in an attempt to prevent a run on the funds.
o US President, George W. Bush, approved use of up to $50 billion from the Exchange Stabilization Fund to insure the holdings of any
publicly offered money market mutual fund.
o Money market funds hold more than $3,400 billion in investor funds.
http://www.treas.gov/press/releases/hp1147.htm
http://www.ft.com/cms/s/0/f770b066-8643-11dd-959e-0000779fd18c.html
o The SEC issues a ban on the short-selling of 799 financial stocks.

o The ban is expected to last for 10 days but could last up to 30.
http://online.wsj.com/article/SB122181688114256411.html
o Henry Paulson urges Congress to pass legislation that will allow the government to buy toxic mortgage securities from the banks.
o The proposal will give the Treasury authority to purchase up to $700 billion of the troubled assets by issuing Treasury securities.
o The chairman of the Treasury, Mr. Paulson, will have the discretion to determine the timing and scale of the purchases.
o The Russian finance ministry announces it will provide $24.21 billion in additional funds to the banking system in the form of three-
month bonds.
o The finance ministry also increased the number of banks with access to budget funding from three to twenty-eight.
http://www.ft.com/cms/s/0/195487e8-881f-11dd-b114-0000779fd18c,dwp_uuid=9170c6b8-7fde-11dd-8eeb-000077b07658.html
o Australia, Taiwan, and the Netherlands announce short-sale ban.

o Australia banned short sales on all stock where Taiwan limited the ban to specific circumstances.
o Goldman Sachs and Morgan Stanley are approved by the Federal Reserve to become bank holding companies which subjects them to
regulation by the Fed.
o As the last two large standalone investment banks, this move leaves only small boutique securities firms.
o The two banks will now be able to take deposits from savers and will be subject to the Fed’s capital requirements.
http://www.ft.com/cms/s/0/97a410b6-884a-11dd-b114-0000779fd18c.html
o The state of New York says that it will bring parts of the credit derivative market under the control and regulation of its insurance
supervisors.
o New York regulators blame the $62,000 billion credit derivative market for being a major contributor to the credit crisis.
o The new state regulations will take effect on January 1, 2009.
http://www.nytimes.com/2008/09/23/business/23swap.html?ref=business
o Goldman Sachs announces it will receive a $5 billion capital infusion from Warren Buffett’s company Berkshire Hathaway.
o Goldman will also raise an additional $2.5 billion from the public by selling common shares.
o Buffett’s investment will likely be viewed as a vote of confidence in Goldman by one of the most well-known and successful investors
in the US.
o Presidential candidate John McCain announces he will suspend campaigning to return to Washington to focus on the financial crisis.
o McCain also called for a postponement of the debate between him and Barack Obama scheduled for Friday if no resolution had been
reached by then.
http://www.ft.com/cms/s/0/b7b24f2c-8a88-11dd-a76a-0000779fd18c.html
o Rumors about financial trouble of the Bank of East Asia (BEA) cause a bank run in Hong Kong.
o BEA chairman and CEO, David Li, says that the rumors are untrue and BEA has sufficient liquidity.
http://www.ft.com/cms/s/0/92281bda-8a3b-11dd-a76a-0000779fd18c.html
o President George W. Bush calls an emergency public address to plead to the US public to support the $700 bailout plan.
o Bush warns that the US is facing a serious financial crisis and the US risks a long and painful recession if Congress fails to pass the
bailout plan.
http://www.ft.com/cms/s/0/07448d80-8aab-11dd-a76a-0000779fd18c.html
o US regulators seize the assets of Washington Mutual (WaMu), the sixth largest US bank.
o WaMu shares had lost a quarter of their value in the day before the regulators stepped in.
o WaMu had tried to auction itself to potential buyers but found little interest because of the large exposure to the US mortgage market
and likelihood of further future writedowns.
o This is the biggest bank failure in US history.
http://www.ft.com/cms/s/0/954fb51e-8b64-11dd-b634-0000779fd18c.html
o JP Morgan acquires WaMu’s bank deposits, assets, and the troubled mortgage portfolio from the federal government.
o JP Morgan paid the Federal Deposit Insurance Corporation (FDIC) $1.9 billion for WaMu’s assets making it the largest US depository
institution.
http://www.ft.com/cms/s/0/f652afe0-8bf2-11dd-8a4c-0000779fd18c.html
o The UK government nationalizes Bradford & Bingley (B&B) after retail savers withdraw tens of millions of pounds in recent days.
o The Financial Services Authority said that B&B no longer met threshold conditions for operating as a deposit taker.
o Spanish bank, Santander, agreed to buy B&B’s £21 billion deposit book and branch network for around £600 million.
http://www.ft.com/cms/s/0/1e5b888c-8c06-11dd-8a4c-0000779fd18c.html
o Washington Mutual Inc. files for Chapter 11 bankruptcy.

o The filing lists more than $8 billion in total debts.
o This is the holding company that was left over after regulators seized Washington Mutual’s banking operations.
http://seattletimes.nwsource.com/html/businesstechnology/2008210121_wamufiling28.html
o Top policymakers and bankers meet in Tianjin, China at the World Economic Forum.
o The decision-makers agreed that more governmental regulation of financial markets is necessary in the wake of the credit crisis.
o Some of the issues discussed were a need for international accounting standards, policing of the credit default swap market, and greater
international cooperation between regulators.
http://www.ft.com/cms/s/0/537372a4-8d88-11dd-83d5-0000779fd18c.html
o The US House of Representatives votes against the $700 billion bailout bill proposed by the Treasury.
o In response, the S&P 500 fell 8.8%—its worse drop since 1987 and the Dow Jones Industrial Average fell 778 points—its worse points
decline ever.
http://www.ft.com/cms/s/0/483ad64a-8e53-11dd-9b46-0000779fd18c.html
o Citigroup agrees to buy the banking operations of Wachovia, the sixth largest lender in the US for $2.2 billion.
o The takeover will turn Citi into the largest retail bank in the US with more than $600 billion in deposits and more than 4,300 branches.
o The bailout was engineered by the FDIC who will provide a cap on losses of Wachovia’s $312 billion mortgage portfolio.
o Under the agreement, Citi will be responsible for the first $42 billion in losses with the FDIC covering any additional losses.
o In return for the cap on losses, the FDIC will receive a $12 billion stake in Citi in the form of warrants and preferred shares.
http://www.ft.com/cms/s/0/fcbcfd24-8e25-11dd-8089-0000779fd18c.html
o Central banks pump more cash into the beleaguered credit markets.
o The Fed more than doubled its swap lines with the European Central Bank and other central banks from $290 billion to $620 billion.
http://www.ft.com/cms/s/0/f9525dd4-8d24-11dd-83d5-0000779fd18c.html
o The European Central Bank along with the governments of the Netherlands, Belgium, and Luxemburg agree to nationalize Fortis, the
European banking and insurance giant.
o The three countries will put €11.2 billion into Fortis to save the bank.
o Each government will take a 49% share of Fortis in their countries.
o One of Germany’s biggest lenders, Hypo Real Estate (HRE), had to be rescued by the German government and other banks after a €50
billion liquidity crisis.
o HRE was given a €35 billion lifeline by German private sector banks, the Bundesbank, and the European Central Bank.
o HRE is also selling off €15 billion of assets to help cover the liquidity shortfall.
http://www.ft.com/cms/s/0/60cec9cc-8df0-11dd-8089-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o The government of Iceland takes control of Glitnir, the country’s third largest bank.
o The government injected €600 million of equity into the bank.
o Regulators blame the credit squeeze and Glitnir’s inability to obtain short-term financing.
o David Oddsson, central bank governor, said that without intervention, Glitnir would have ceased to exist in the next couple of weeks.
http://www.ft.com/cms/s/0/e096162e-8e18-11dd-8089-0000779fd18c.html
o Mitsubishi UFJ invests $9 billion in Morgan Stanley in exchange for a 21% share of the company.
o The deal consists of 10% of Morgan Stanley’s common stock and $6 billion in preferred stock.
http://www.cbsnews.com/stories/2008/09/29/ap/business/main4485753.shtml
o Neuberger Berman is sold to Bain Capital and Hellman & Friedman for $2.15 billion.
o Neuberger is the asset management arm of Lehman Brothers Holdings.
o Just a month before Lehman Brothers collapsed, Carlyle was prepared to pay $7 billion for Neuberger and also let Lehman Brothers
retain the right to buy the asset back.
o Financial Times reports that an earlier deal to sell Neuberger could have helped Lehman avoid collapse.
http://www.ft.com/cms/s/0/f17b35ce-8e4e-11dd-9b46-0000779fd18c.html
o Ireland guarantees deposits of six of the largest Irish banks.

o Ireland guarantees deposits of six of the largest Irish banks.
o The plan guarantees around €400 billion of liabilities in addition to the individual depositor’s €100,000 already covered under the
existing deposit scheme.
o The six banks covered were: Allied Irish Banks, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building
Society, and Educational Building Society.
http://www.ft.com/cms/s/0/2124f8f4-8eb9-11dd-946c-0000779fd18c.html
o Dexia, a Franco-Belgian bank specializing in local authority finance, gets a €6.4 billion capital injection from various European
governments.
o The lifeline includes €3 billion from Belgium and Belgian stakeholders, €3 billion from the French government and state controlled
bank Caisse des Depots, and €376 million from the Luxembourg government.
o The governments claimed that Dexia would have failed without the bailout and caused unacceptable systematic risk to their financial
system.
http://www.ft.com/cms/s/0/116457fe-8ebc-11dd-946c-0000779fd18c,dwp_uuid=9c837fea-0087-11dd-a0c5-000077b07658.html
o The Securities and Exchange Commission (SEC) issues a clarification on fair value accounting.
o The mark-to-market rule has been blamed by many to have exacerbated the credit crisis by forcing banks write down their assets.
o The clarification says that fair value assumes a orderly transaction between market participants and distressed or forced liquidation sales
are not orderly.
http://www.sec.gov/news/press/2008/2008-234.htm
• October 1, 2008:
o The collapse of Sigma Finance marks the end of the era of structured investment vehicles (SIV).
o Sigma was the last surviving SIV, a debt fund that would borrow short-term commercial paper and lend long at a higher interest rate.
o SIVs were crippled when the credit crunch prevented financing of the long-term debt.
o Sigma managed $27 billion and was the oldest and last surviving member of the SIV industry that once controlled over $400 billion.
o The decision to liquidate was made after JP Morgan cut Sigma’s last funding line.
http://www.ft.com/cms/s/0/18fbcd5c-8fe4-11dd-9890-0000779fd18c.html
o The European Commission proposes a revision to the Capital Requirements Directive which controls the capital requirements of banks
operating within the European Union.
o The new rules are designed to reinforce the stability of the financial system, reduce risk exposure, and improve the supervision of banks
that operate in more than one European Union country.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/1433&format=HTML&aged=0&language=EN&guiLanguage=fr
http://ec.europa.eu/internal_market/bank/docs/regcapital/crd_proposal_en.pdf
o MBIA, a monoline insurance company, files a lawsuit against Countrywide Financial claiming the mortgage lender fraudulently induced
MBIA to guarantee billions of dollars in Countrywide mortgage bonds.
o MBIA filed the suit in New York’s Supreme Court and claims the bad loans have cost it more than $459 million in payouts on the
insurance contracts.
o Countrywide Financial was acquired by Bank of America earlier this year.
http://www.ft.com/cms/s/0/2fa80d88-900a-11dd-9890-0000779fd18c.html
• October 2, 2008:
o General Electric announces plans to raise $15 billion in capital from a sale of common stock.
o $3 billion will come from Warren Buffett’s Berkshire Hathaway along with $3 billion more in warrants that expire in five years.
http://www.ft.com/cms/s/0/68209e54-901a-11dd-9890-0000779fd18c.html
o Wachovia terminates a $9.3 billion short-term fund that held money for colleges and other non-profit institutions.
o The colleges may not have access to their investments for years putting pressure on payroll and other bills.
• October 3, 2008:
o The revised bailout plan passes through the US House of Representatives and is signed into law by President Bush.
o The bill gives the Treasury Department the power to purchase $700 billion in toxic debt on banks’ balance sheets.
o Changes in the bill from Monday’s failure to pass included an increase in the FDIC insurance on bank deposits.
http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf
http://money.cnn.com/2008/10/03/news/economy/house_friday_bailout/index.htm?postversion=2008100309
o California governor, Arnold Swarzenegger, tells federal government that California may need to borrow $7 billion in an emergency loan
because of the tightening of the credit markets.
o The loan would be used to pay for public services such as law enforcement, hospitals, and firefighters until tax revenue arrives in April.
o Mr. Swarzenegger said the state will need the money by the end of October but may not be able to secure a loan by then.
http://www.ft.com/cms/s/0/38105032-9165-11dd-b5cd-0000779fd18c.html
• October 4, 2008:
o Wells Fargo announces it will pay $15.1 billion in an all-share offer to purchase Wachovia.
o This is a significantly better deal than the $2.2 billion government engineered deal with Citigroup.
o The proposed sale does not involve government assistance but Citigroup plans to file for an injunction to prevent the deal or substantial
damages from Wells Fargo.
http://www.ft.com/cms/s/0/da6d694a-91ac-11dd-b5cd-0000779fd18c.html
• October 5, 2008:
o Germany announces it will guarantee all privately-held German bank accounts.

o All the accounts are currently worth €568 billion.
o The move is aimed at preventing panic withdrawals in Europe’s largest economy.
o Germany’s current scheme protects only the first €20,000 per account.
http://www.ft.com/cms/s/0/d895ef54-92ef-11dd-98b5-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
• October 6, 2008:
o French President, Nicolas Sarkozy, hosts an emergency summit on the global financial crisis in Paris.
o Leaders of France, Germany, UK, and Italy meet and agreed that Europe will not allow any bank to fail and file for bankruptcy.
o Sarkozy said that the European Union will stand behind their banking and financial institutions.
o Measures to protect banks could include liquidity from the central banks, targeted measures for individual banks or a reinforcement of
bank deposit guarantees.
o Sarkozy holds the rotating presidency of the European Union.
http://www.forbes.com/feeds/ap/2008/10/06/ap5513800.html
http://online.wsj.com/article/SB122313566316305169.html?mod=googlenews_wsj
o Bank of America agrees to settle claim of predatory lending charges against recently acquired Countrywide Financial.
o The settlement was with attorney-generals in 11 states.
o BofA agreed to offer more affordable mortgage payments to borrowers who financed with subprime mortgage loans or pay option
adjustable rate mortgages serviced by Countrywide and originated before December 31, 2007.
o BofA said that around 400,000 borrowers will be helped by the deal.
http://www.ft.com/cms/s/0/a15e7646-93ee-11dd-b277-0000779fd18c.html
o The Danish government announces plan to guarantee all banking deposits and some inter-bank loans.
o In return for the guarantees, the country’s banks must establish a rescue fund of $6.5 billion.
http://www.ft.com/cms/s/0/f4e2f0e6-93c9-11dd-9a63-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o Iceland passes legislation that allows the government to nationalize, merge, or force ailing banks into bankruptcy.
o The new bill also allows the government to take over housing loans held by the banks and put them into a government housing fund.
http://www.ft.com/cms/s/0/07113e40-938d-11dd-9a63-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o BNP Paribas agrees to takeover Fortis from the Belgian government for €14.5 billion.
o This deal makes BNP the largest bank operating in the Eurozone.
http://www.ft.com/cms/s/0/a979d518-9390-11dd-9a63-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html
o The Federal Reserve holds talks with dealers, investors, and exchange executives in hope of speeding up the process of creating a
central clearing house for credit default swaps (CDS).
o The CDS on Freddie Mac and Fannie Mae debt were recently cleared for around 95 cents on the dollar.
o Estimates of the value of CDS on Lehman Brothers debt are around $400 billion, which are expected to be cleared for 10 cents on the
dollar costing banks up to $360 billion.
http://www.ft.com/cms/s/0/c1be9880-9407-11dd-b277-0000779fd18c.html
• October 7, 2008:
o The Dow Jones Industrial Average falls below 10,000 for the first time since 2004.
o Despite the Fed’s attempt to inject liquidity in the market, investors sell-off because of fears of a recession and uncertainty around the
credit crisis.
http://www.ft.com/cms/s/0/c7a1612e-9407-11dd-b277-0000779fd18c.html
o Bank of America (BofA) reports third quarter earnings of $1.2 billion, less than analyst expectations.
o In an effort to get through the credit crisis, BofA cut its dividend by half and announced plans to raise an additional $10 billion in
capital.
http://www.ft.com/cms/s/0/50592a82-93fa-11dd-b277-0000779fd18c.html
o The Internal Revenue Service relaxes rules on US corporations repatriating money held oversees in an attempt to inject liquidity into the
US financial market.
o The new ruling allows the companies to receive loans from their foreign subsidiaries for longer periods and more times a year without
triggering the 35% corporate income tax.
o Iceland nationalizes the second largest bank in the country, Landsbanki.

o The Icelandic Financial Supervisory Authority dismissed the bank’s management and appoints a receivership.
http://www.ft.com/cms/s/0/34681bc8-944d-11dd-953e-000077b07658.html
o Iceland turns to Russia for a €4 billion loan to help stabilize its financial situation.
o The loan, if finalized, could almost double Iceland’s foreign currency reserves.
o Prime minister, Geir Haarde, said the loan will be used to help support the krona which plummeted against the euro earlier in the week.
http://www.ft.com/cms/s/0/41392f38-9450-11dd-953e-000077b07658,dwp_uuid=a36d4c40-fb42-11dc-8c3e-000077b07658.html
o The Fed announces plans to set up a special purpose vehicle to buy unlimited amounts of three-month commercial paper from banks and
non-financial companies.
o The Fed said this move was necessary because companies were struggling to issue commercial paper for any period longer than
overnight.
http://www.ft.com/cms/s/0/f797a084-9473-11dd-953e-000077b07658.html
o Spain announces the formation of a €30-50 billion emergency fund to provide liquidity by buying Spanish bank assets.
o Along with the fund, prime minister Jose Luis Rodriguez Zapatero announced the Spanish government will increase its guarantees for
bank deposits from €20,000 to €100,000.
o Mr. Zapatero said the fund will provide credit and liquidity by buying healthy assets, not toxic ones.
http://www.ft.com/cms/s/0/8e37974e-9495-11dd-953e-000077b07658.html
o Russia injects $37 billion in long-term subordinated loans into state- controlled banks.
o The government will provide liquidity in the Russian market by using Russia’s two largest state banks, VTB and Sberbank.
o Investors hope the long term liquidity will unfreeze the money markets in Russia.
http://www.ft.com/cms/s/0/32ca8f78-9464-11dd-953e-000077b07658.html
• October 8, 2008:
o Six central banks coordinate efforts and cut interest rate in an attempt to stem the economic damage from the financial shock of the
credit crisis.
o The central banks involved in the cut were UK, Canada, Sweden, Switzerland, US Fed, and the European Central Bank.
o The half-point rate cut was the first time the ECB has worked together with the Fed since September 11, 2001.
o Jefferson County, Alabama joins California and Massachusetts in petitioning Treasury officials for federal financial help.
o Alabama governor, Bob Riley, asked federal officials to support a $2.7 billion refinancing bailout.
o If the county was forced into bankruptcy, it could be the largest bankruptcy ever in the US municipal bond market.
o Municipal markets rely on financial guarantees from banks and insurance companies which have been difficult to obtain during the
credit crunch.
http://www.ft.com/cms/s/0/6d8334e8-94d3-11dd-953e-000077b07658.html
o The UK government launches a £400 billion rescue plan to help restore confidence in the financial markets.
o The three-pronged plan included: 1) the government investing as much as £50 billion in the banking industry, 2) guaranteeing as much
as £250 billion of new bank debt, and 3) adding £100 billion to the existing Bank of England short-term loan scheme.
http://www.ft.com/cms/s/0/b7da5246-9574-11dd-aedd-000077b07658.html
o The UK government declares it will sue Iceland to recover all UK customer deposits in Icesave.
o Reykjavik reversed its pledge to compensate depositors in the failed internet bank that was nationalized.
o Icesave has about 300,000 UK customers that prime minister Gordon Brown said will be fully reimbursed for their loss.
o £50,000 is the legal ceiling for compensation claims but UK chancellor, Alistar Darling decided this was an exceptional circumstance
and the UK government will back any additional amounts.
http://www.ft.com/cms/s/0/44a180c4-9524-11dd-aedd-000077b07658.html
o Iceland’s largest bank, Kaupthing, receives a SK5 billion loan from Sweden’s central bank.
o The loan was given to Kaupthing’s Swedish division to avert significant liquidity problems putting Swedish deposits in jeopardy.
http://www.ft.com/cms/s/0/33d5b2f2-9514-11dd-aedd-000077b07658.html
• October 10, 2008:
o Japanese company Yamato Life files for bankruptcy becoming what is viewed as the first direct casualty in Japan from the fallout of
the US subprime mortgage crisis.
o Yamato Life had $2.7 billion in liabilities at the time of the filing.
o Japanese government officials tried to downplay the bankruptcy as a special case based on Yamato’s unique business model but some
analysts believed it to be a foreshadowing of things to come in Japan as the credit crisis begins to affect the country.
http://www.ft.com/cms/s/0/5e003a08-967b-11dd-9dce-000077b07658.html
• October 11, 2008:
o The Dow Jones Industrial Average caps its worst week ever with its highest volatility day ever recorded in its 112 year history.
o Over the last eight trading days, the DJIA has dropped 22% amid worries of worsening credit crisis and global recession.
o Paper losses now on US stocks now total $8.4 trillion from the market highs last year.
o The G7, a group of central bankers and finance ministers from the Group of Seven leading economies, meet in Washington and agree to
urgent and exceptional coordinated action to prevent the credit crisis from throwing the world into depression.
o The G7 did not agree on the concrete plan that was hoped for.
http://www.ft.com/cms/s/0/22655888-972b-11dd-8cc4-000077b07658.html
• October 13, 2008:
o European Union leaders meet in Paris to coordinate efforts to combat Europe’s credit crisis.
o Many of the EU members currently using the euro adopted agreed upon measures at the meeting while the rest of the 27 member EU
will have a chance to adopt the measures at a meeting later in the week.
o The four main parts of the agreement included: 1) Making it easier for banks to obtain new capital by guaranteeing the banks’ issuance
of new medium-term debt; 2) Reducing distressed banks through recapitalization and other appropriate means; 3) a pledge to support
banks by the government buying preferred shares; and 4) Urging regulators to relax mark-to-market accounting rules that require
securities to be valued at their current price.
o The EU plan follows many of the same measures included in last week’s bailout announcements by both the United States and the
United Kingdom.
o This meeting between the heads of the 15 countries who have adopted the euro signified the first formal meeting since the launch of the
currency back in 1999.
http://www.actionforex.com/latest-news/european-economy/eu-leaders-reach-agreement-to-combat-financial-crisis-(update)-
2008101264004/
http://www.ft.com/cms/s/0/286c70a2-993a-11dd-9d48-000077b07658.html
o French president, Nicolas Sarkozy, pledges €360 billion in liquidity to French banks.
o The plan will include €320 billion in guarantees for new bank debt and a €40 billion fund for recapitalizing lenders.
o In return for the bailout, the French government will demand conditions on the banks such as changes to pay and bonus structures.
http://www.ft.com/cms/s/0/146274aa-996f-11dd-9d48-000077b07658.html
o The prime minister of Spain, Jose Luis Rodriguez Zapatero, announces that Spain will provide up to €100 billion of guarantees for new
debt issued by commercial banks in 2008.
o This plan followed a meeting at the eurozone summit over the weekend to try to develop a coordinated effort to combat the credit crisis.
http://www.ft.com/cms/s/0/1d1019e0-991f-11dd-9d48-000077b07658.html
o The UK government starts the nationalization process by injecting £37 billion in the nation’s three largest banks.
o The UK government will end up owning a majority share in the Royal Bank of Scotland (RBS) and over a 40% share in Lloyds and
HBOS.
o In return for the bailout, the banks have agreed to cancel dividend payments until the loans are repaid, have board members appointed
by the Treasury, and limit executive pay.
http://www.ft.com/cms/s/0/83bc2cea-98ef-11dd-9d48-000077b07658.html
o The European Central Bank attempts to revive credit market by weekly injections of unlimited euro funds at an interest rate of 3.75%.
o The ECB president, Jean-Claude Trichet, was also contemplating relaxing the collateral standards to make the funds more accessible to
banks.
o In a coordinated move with the US Federal Reserve, the ECB, the Bank of England and Swiss National Bank also announce they would
provide unlimited liquidity at a pre-fixed interest rate into the market for dollars over periods of seven days, a month, and 84 days.
http://www.ft.com/cms/s/0/6fcc5ed0-9903-11dd-9d48-000077b07658.html
o Following its European partners, Italy pledges to intervene as necessary to prevent any bank failures in its country.
o Finance minister, Giulio Tremonti, said Italy will guarantee new bank bonds of up to 5 years until the end of 2009 and the Bank of Italy
will provide €40 billion in treasury bills to banks to refinance inferior assets that can not be currently used as collateral.
http://www.ft.com/cms/s/0/1c802092-993d-11dd-9d48-000077b07658.html
o In coordination with other eurozone countries, the Dutch government announces it will guarantee interbank lending up to €200 billion.
o This follows the set up of a €20 billion Dutch fund to help recapitalize banks and insurers.
http://www.ft.com/cms/s/0/acbf267e-9949-11dd-9d48-000077b07658.html
o Germany approves a plan to inject €500 billion into credit markets.

o The plan gives finance minister, Peer Steinbrück, access to a €100 billion stabilization fund and the authority to guarantee up to €400
billion in bank debt.
o Concessions by banks who tap into this fund include a €500,000 limit on executive pay, a ban on bonuses, and a ban on dividend
payments.
http://www.ft.com/cms/s/0/56894d2c-9938-11dd-9d48-000077b07658.html
• October 14, 2008:
o The US taps into the $700 billion available from the Emergency Economic Stabilization Act and announces the injection of $250 billion
of public money into the US banking system.
o The form of the rescue will include the US government taking an equity position in banks that choose to participate in the program in
exchange for certain restrictions such as executive compensation.
o Nine banks agreed to participate in the program and will receive half of the total funds: 1) Bank of America, 2) JPMorgan Chase, 3)
Wells Fargo, 4) Citigroup, 5) Merrill Lynch, 6) Goldman Sachs, 7) Morgan Stanley, 8) Bank of New York Mellon and 9) State Street.
o Other US financial institutions eligible for the plan have until November 14 to agree to the terms.
o The plan also included allowing the FDIC to temporarily guarantee the senior debt of all FDIC-insured institutions and increasing
access to funding for businesses by announcing further details of the commercial paper funding facility.
http://www.ft.com/cms/s/0/395a0fa6-99f2-11dd-960e-000077b07658.html
http://www.ft.com/cms/s/0/20a79422-99ef-11dd-960e-000077b07658.html
o United Arab Emirates’ (UAE) ministry of finance added a $19 billion liquidity injection to domestic banks bringing the total dollars
injected to $32.7 billion.
o The UAE central bank offered 13.6 billion in liquidity to help domestic banks in September.
o To protect local deposits, the UAE government guaranteed all deposits and interbank lending.
http://finance.indiainfo.com/2008/10/14/0810141327_uae_injects_further_19_bn_into_countrys_banking_sector.html
o Japan announces a plan that will help steady the Japanese market and avoid the worse of the credit crisis.
o Among the measures included are lifting restrictions on companies buying back their shares, strengthening disclosure on short selling,
and the temporary suspension of the sale of government-owned stocks.
http://www.ft.com/cms/s/0/3505b08e-999a-11dd-9d48-000077b07658.html
o The Australian government unveils a $10.4 billion stimulus package.

o The Economic Security Strategy is designed to help pensioners, low and middle income families, and first time home buyers withstand
the credit crisis and global economic slowdown.
o This followed the Australian government announcing that it would guarantee all bank deposits for three years, guarantee all term
wholesaling funding by Australian banks in international markets and double its planned purchase of residential mortgage backed
securities.
http://www.ft.com/cms/s/0/07e76430-9995-11dd-9d48-000077b07658.html
o The Icelandic stock exchange begins trading again after a three day shutdown.
o The opening did not include Iceland’s three largest banks which were nationalized last week.
http://www.ft.com/cms/s/0/a2e44924-99dd-11dd-960e-000077b07658.html
• October 15, 2008:
o Greece announces a €28 billion package to support the banking sector and sustain economic growth.
o Finance minister, George Alogoskoufis, said that Greek banks were in a healthy position but measures needed to be taken to keep their
costs of funding in line with other European banks.
o The package includes guarantees for up to €15 billion of medium-term lending and €8 billion of special government bond issues.
http://www.ft.com/cms/s/0/a4570824-9acc-11dd-a653-000077b07658.html
• October 16, 2008:
o Citigroup announces a third quarter loss of $2.8 billion after receiving a $25 billion injection from the US government.
o CFO, Gary Crittenden, says that the harsh climate in the banking industry may lead to opportunistic acquisitions for Citigroup.
o Mr. Crittenden stated that Citi may use the $25 billion injection to focus on its five core businesses instead of funding an acquisition.
http://www.ft.com/cms/s/0/d0c71ef8-9b76-11dd-ae76-000077b07658.html
o Switzerland agrees to fund a vehicle designed to hold up to $60 billion of toxic debt held by UBS.
o The government also injects €3.9 billion to help recapitalize UBS.
o The Swiss government denied this plan as being a rescue because UBS did not face collapse but rather has a credibility problem.
o The plan will result in almost 10% of UBS being government owned.
o Credit Suisse declined government assistance and instead turned to private equity to raise SFr10 billion, making it the best capitalized
financial institution in Europe.
o The private investors included Qatar’s sovereign wealth fund, the Olayan family of Saudi Arabia, and Koor Industries of Israel.
http://www.ft.com/cms/s/0/98fd7346-9be4-11dd-ae76-000077b07658.html
• October 17, 2008:
o The European Union 27 leaders sign off on a joint $2.7 trillion bank bailout plan after a 2-day summit in Brussels.
o Other ideas explored at the summit included new international supervisory boards for at least 30 of the world’s largest banks, a bloc
wide stimulus package, and implementing a plan to battle climate change.
o The EU leaders also agreed to use a meeting this weekend with President Bush to discuss proposals on shaping international financial
rules.
o South Korea announces plans to raise spending and cut taxes in order to stabilize its economy.
o This was in response to devastating falls in both the won and the Seoul stock market.
o More details about a rescue package are expected to be unveiled on Sunday.
o Singapore and Malaysia both announce blanket guarantees on bank deposits until December 2010.
http://www.ft.com/cms/s/0/bf1e4a0c-9c73-11dd-a42e-000077b07658.html
• October 19, 2008:
o The South Korean government announces a $130 billion rescue package for its banks and companies to help withstand the credit crisis.
o Seoul also joined Hong Kong and Australia in guaranteeing bank debts.
o South Korea will offer guarantees for three years.
o The government will inject $750 million into the Industrial Bank of Korea to help enhance its capital base.
o South Korean banks are seen as the most vulnerable in Asia due to their dependence on foreign funding.
http://www.ft.com/cms/s/0/5befbd26-9e03-11dd-bdde-000077b07658.html
o The Dutch government injects €10 billion into banking and insurance group ING.
o The form of the package will allow the government to purchase preferred shares that will count towards ING’s Tier 1 capital but will
not have voting rights or dilute ordinary shareholders.
o In return for the injection, ING dropped its dividend, cut all executive board bonuses, and gave the government 2 of the 12 seats on the
supervisory board.
http://www.ft.com/cms/s/0/43307256-9e05-11dd-bdde-000077b07658.html
• October 20, 2008:
o Germany eases the conditions imposed on banks wishing to enroll in the €500 billion rescue package passed last week.
o The enactment of the decree was meant to encourage the banks that needed credit guarantees but did not capital to participate.
o Banks that want a credit guarantee only will have to submit their business model for approval.
o The €500 billion fund is up and running but the decree also set a €10 billion limit that may be injected into a single bank along with a
€5 billion maximum value of assets per bank.
http://www.ft.com/cms/s/0/1a6b3ecc-9e9c-11dd-98bd-000077b07658.html
o Pakistan discusses a $10-15 billion international support package with the International Monetary Fund.
o The package will be designed to help Pakistan stabilize its economy and avoid a balance of payments crisis.
o Although the talks have not resulted in a formal request, a little over half of the funding would come from the IMF with the balance
provided by the World Bank, the Asian Development Bank, and bilateral donors including Saudi Arabia.
http://www.ft.com/cms/s/0/474bc524-9ed3-11dd-98bd-000077b07658.html
o Iceland seeks $6 billion rescue package from the International Monetary Fund to help stabilize its economy.
o The talks are likely to end up with the IMF contributing just over $1 billion with the remaining balance supplied by central banks in the
Nordic region and Japan. Russia could also participate.
o The negotiations have not resulted in a formal request from the IMF yet but people close to the situation say that the IMF’s involvement
is a prerequisite for the central banks and Japan.
o The talks have focused on three areas of Iceland’s economy; the banking sector, fiscal policy and monetary policy, and the exchange
rate.
http://www.ft.com/cms/s/0/7b83b114-9e9f-11dd-98bd-000077b07658.html
o The French government announces it will inject €10.5 billion into France’s six largest banks.
o The effort is aimed at stabilizing the banks’ balance sheets to ensure they will continue to provide credit to consumers and businesses.
o This plan was in response to the reluctance of the French banks to take advantage of the €40 billion recapitalization fund set up by the
French government earlier in the week.
o The six banks included Credit Agricole, BNP Paribas, Societe Generale, Credit Mutuel, Caisse d’Epargne, and Banque Populaire.
http://www.ft.com/cms/s/0/7fbcf47e-9f09-11dd-98bd-000077b07658.html
o Sweden announces a $205 billion program to stabilize its financial system and boost liquidity.
o Along with the rescue package, Sweden will set up a $2 billion fund that can be used to buy stakes in any bank that requires capital.
o Any bank that receives a capital injection will have to agree to limit salaries and bonus payments to managers.
o The government said that no banks have experienced capital problems so far but they are worried about their exposure to Baltic states
that will likely have a sharp economic downturn.
http://search.ft.com/search?queryText=sweden+launches&aje=true&dse=&dsz=
• October 21, 2008:
o The US Federal Reserve announces it will spend $540 billion to purchase short-term debt from money market mutual funds.
o The large amount of redemption requests during the credit crisis have caused the money market funds to scale back lending to banks
contributing to the credit freeze on interbank lending markets.
o This government is hoping the injection will help unfreeze the credit markets making it easier for businesses and banks to obtain loans.
o The structure of the plan involves the Fed setting up four special purpose vehicles that will purchase the assets.
http://www.federalreserve.gov/newsevents/press/monetary/20081021a.htm
http://www.ft.com/cms/s/0/4da5eebc-9f83-11dd-a3fa-000077b07658.html
o UK announces plans for a £3 billion loan to the government of Iceland.

o The loan proceeds will be used to help British savers who lost their deposits in Icesave after being nationalized by the Icelandic
government.
o The loan will hopefully help unfreeze the assets of over 300,000 British savers who had deposits with Icesave.
o The loan will also help relieve tensions between the UK and Iceland after Iceland nationalized its banking sector, freezing the assets of
many British savers.
http://www.ft.com/cms/s/0/108635c0-9fbd-11dd-a3fa-000077b07658.html
o South Korea announces plans to spend $3.8 billion to buy land and houses from cash strapped developers.
o The governmental efforts are designed to prevent the construction industry from collapsing and taking the 20% share of the economy
with it.
http://www.ft.com/cms/s/0/940ae466-9f8d-11dd-a3fa-000077b07658.html
o Moody’s cuts the rating of ING Groep, the largest Dutch financial services company.
o The credit rating on ING’s senior debt was lowered to Aa3 to reflect the lower profitability of the bank.
http://www.bloomberg.com/apps/news?pid=20601085&sid=ahxDDlKUJLis&refer=europe
• October 22, 2008:
o The White House announces it will hold a G-20 meeting on November 15, 2008.
o The global financial summit is expected to focus on the credit crisis and steps that can be taken to improve the world economy.
http://www.ft.com/cms/s/0/2b1a9e52-a04a-11dd-80a0-000077b07658.html
o Wachovia announces third quarter losses of $23.9 billion.

o They also announced details of the run on the bank before its sale to Wells Fargo. The run included depositor’s withdrawal of more than
$26 billion or 24% of their deposits.
o The loss was the most that any bank has impaired since the beginning of the credit crisis.
http://www.ft.com/cms/s/0/6a21e164-a045-11dd-80a0-000077b07658,dwp_uuid=ffa475a0-f3ff-11dc-aaad-0000779fd2ac.html
o Italy attempts to protect local small businesses with aid package.

o The Foreign Trade Institute will provide €100 million and the private sector will provide €30 million in an effort to make Italian
businesses more competitive in the world marketplace and ease the pressure of the financial crisis.
http://www.ft.com/cms/s/0/84279a5a-a012-11dd-80a0-000077b07658.html
o The California Public Employees’ Retirement System (Calpers), the largest public pension fund in the US, says it will increase its
contribution rate from employers to cover losses incurred on its investments.
o Calpers said that its funds have fell more than 20% or at least $48 billion from the end of June until October 10, 2008.
o This is an effort by Calpers to keep delivering its promise to supply the pension benefits to the 1.6 million beneficiaries.
• October 24, 2008:
o AIG has borrowed a total of $90.3 billion of the $123 billion rescue fund set up by the government.
o The money has been used to pay off bad debts incurred by AIG’s practice of guaranteeing other firm’s risky mortgage investments
(called credit default swaps).
o The new CEO of AIG warned that the $123 billion lifeline provided by the government may not be enough to keep AIG afloat.
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/23/AR2008102303352.html
• October 26, 2008:
o The International Monetary Fund announces a proposed loan to Ukraine of $16.5 billion.
o The loan, once approved by the IMF’s executive board, will help to stabilize Ukraine’s banking system and currency both of which have
been damaged by the global credit crisis.
o The loan will likely be a standby arrangement for two years and will only be approved if Ukraine’s parliament agrees to approve
legislation aimed at propping up confidence and liquidity.
http://www.ft.com/cms/s/0/11b42960-a39c-11dd-942c-000077b07658.html
o Kuwait guarantees all local bank deposits and suspends trading in Gulf Bank, the nation’s second largest bank.
o The move was made after some clients dealing in derivatives refused to honor their commitments.
o A senior banker estimated the losses to be around $800 million but Gulf Bank did not reveal the extent of the losses.
o This was the first action of this type taken against a Middle Eastern bank.
o Kuwait also announced it would set up a task force to deal with the implications of the global credit crisis.
http://www.ft.com/cms/s/0/79fb64a4-a35e-11dd-942c-000077b07658.html
• October 27, 2008:
o The Bank of Korea cut interest rates by 75 basis points and said it would buy up to $7 billion of bank bonds to provide more liquidity to
the banking sector.
o To prop up the Won, the central bank will allow exporters to borrow dollars to pay for foreign exchange losses and small companies to
roll over foreign-currency debt for one year.
o These measures were taken after an emergency monetary meeting over the weekend where President Lee Myung-bak called for strong
action to help South Korea withstand the global credit crisis.
http://www.ft.com/cms/s/0/de68c258-a3c5-11dd-942c-000077b07658.html
o Belgium announces a €3.5 billion capital injection into KBC.

o Despite assurances that KBC’s capital base was solid; its share price plummeted on Friday.
o The structure of the injection was similar to the ING injection—dividends will not be paid this year, no executive bonuses, and the state
will nominate two directors for KBC’s board.
http://www.ft.com/cms/s/0/afaf0986-a410-11dd-8104-000077b07658.html
• October 28, 2008:
o The Bank of England says that the world’s financial firms have now lost $2.8 trillion as a result of the global credit crisis.
o Bank governor, Mervyn King, said that the British banking system had been closer to collapsing earlier this month than at any time
since World War I.
o UK Prime Minister, Gordon Brown, called on the IMF to be able to offer more than the $250 billion it has now to help struggling
nations.
o The Dutch give Aegon a €3 billion capital injection.

o Aegon, the Dutch insurance company, has seen its shares decline 75% of their value over the past year.
o In return for the injection, Aegon will slash its dividend, the board will give up all bonuses, and the government will appoint two
supervisory board members—identical to the terms agreed to by ING and KBC.
http://www.ft.com/cms/s/0/918f17cc-a4c2-11dd-b4f5-000077b07658.html
o The chairman of Gulf Bank resigns over derivative losses in Kuwait’s second largest bank.
o Fitch rating agency downgraded the bank and Moody’s warned that it might downgrade the bank after the derivate losses, a run on the
bank, and lack of risk management.
o After Kuwait’s government suspended trading on Gulf Bank’s stock on Friday, depositors showed up to withdraw their money Monday
morning.
o The run on the bank was considered modest and was the first known bank run in the Middle East.
http://www.ft.com/cms/s/0/63831a34-a55a-11dd-b4f5-000077b07658.html
o Hungary will get a $25.1 billion rescue package to help bolster confidence in its economy that has been devastated by the global credit
crisis.
o The IMF will provide $15.7 billion, the European Union $8.1 billion, and $1.3 billion from the World Bank.
o This will be the largest international rescue package for one country and the first for an EU member country since the crisis began.
o Hungary has been hard hit by the global credit crisis because of its dependence on foreign financing.
http://www.ft.com/cms/s/0/1026656e-a553-11dd-b4f5-000077b07658.html
o The US Federal Reserve announces a temporary reciprocal currency arrangement with the Reserve Bank of New Zealand.
o The swap agreement will help ease pressures in the US dollar short-term funding markets.
• October 29, 2008:
o The Fed, the Banco Central do Brazil, the Banco de Mexico, the Bank of Korea, and the Monetary Authority of Singapore announce a
temporary swap line between the banks.
o The agreement is meant to improve liquidity and help the countries that are sound and well managed obtain US dollar funding.
http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm
o Kuwait’s parliament votes to guarantee all bank deposits of all local and foreign banks operating in the emirate.
o This move will guarantee around $86 billion of deposits which is designed to instill confidence in Kuwait’s banking system after the
central bank had to rescue the country’s second largest bank earlier this week.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aw1ZBVd5IIFA
o Hypo Real Estate (HRE) becomes the first private sector group to tap into Germany’s €500 billion bailout fund.
o HRE, a commercial property lender, requested €15 billion to help with short-term liquidity issues.
http://www.ft.com/cms/s/0/489034b4-a59b-11dd-9d26-000077b07658.html
• October 31, 2008:
o Citigroup announces a $1.4 billion loss on securitized credit card loans in the third quarter compared to a $169 million gain in the third
quarter of last year.
o Citigroup said that global credit card revenue has declined 40%.
o This may be the beginning of the second stage of the global financial crisis, instead of subprime mortgages, credit card lenders are
expected to suffer high losses as rising unemployment and financial hardship make iit difficult for borrowers to pay their bills.
o Credit card loans have been largely securitized in the same way that mortgages have been.
http://www.reuters.com/article/businessNews/idUSTRE4A005E20081101?feedType=RSS&feedName=businessNews
o J.P. Morgan Chase announces a plan to restructure $70 billion in mortgages for borrowers who are behind on their payments or soon
could be.
o The plan will affect around 400,000 borrowers.
o The new terms will include loans that carry lower interest rates, smaller principal amounts, or other more affordable terms.
o South Korea announces plans to pump an extra $11 billion into their economy next year.
o The stimulus package is designed to help South Korea withstand the global financial crisis, which is starting to affect the price of
exports.
o Kang Man-soo, the finance minister, said that economic growth could fall to the lowest level in a decade in the wake of the global
credit crisis.
o Much of the money is expected to go to help the real estate and construction industries, along with the smaller firms that make up 90%
of the workforce.
http://www.ft.com/cms/s/0/1e9d78ee-a977-11dd-958b-000077b07658.html?nclick_check=1
o HBOS, the UK’s largest mortgage lender, reveals writedowns of £5.18 billion for the nine months to the end of September.
o The loss included a £457 million on HBOS’s exposure to Lehman Brothers and Washington Mutual.
o The bank said raising £11.5 billion will increase its capital position and help the group withstand the global credit crisis.
http://www.ft.com/cms/s/0/286e797a-a988-11dd-958b-000077b07658.html
o The European Union finance ministers approve a set of proposals designed to strengthen the world’s financial system.
o The proposal contained ideas that will be brought up by the EU at the G-20 meeting on November 15.
o The five ideas included: 1) supervisory colleges for all cross-border financial companies, 2) strengthened risk control mechanisms in
financial institutions, 3) codes of conduct on excessive risk-taking, 4) tighter rules for credit rating agencies, and 5) harmonized
definitions of banks’ capital to permit comparisons.
http://www.ft.com/cms/s/0/bdb0196c-aadc-11dd-897c-000077b07658.html
o Two of Brazil’s largest banks agree to merge a week after assuring investors that they would survive the global credit crisis.
o Brazil’s second largest non-state bank, Itaú Holding Financeira SA, will purchase its smaller rival, Unibanco, creating Latin America’s
largest bank.
o Latin America’s banks, once thought to be immune to the credit crisis because of their low exposure to subprime mortgage securities,
have been hurt by the possibility of default on their loans and sharp currency declines.
o Finance minister, Guido Mantega, said the increased concentration will help strengthen the local financial system.
o Swiss Re, one of the world’s largest reinsurers, announces a $263 million loss.
o This announcement surprised analysts who were expecting a profit.
o Swiss Re had a writedowns of 289 million Swiss francs on its credit default swap portfolio during the quarter.
o Barack Obama wins the US presidential election.

o Obama will be inaugurated on January 20, 2009.
o Exit polls show that around 60% of the voters put the economy as their top concern.
http://www.ft.com/cms/s/0/0e59f430-ab61-11dd-b9e1-000077b07658,dwp_uuid=729ab242-9cb1-11db-8ec6-0000779e2340.html
o The US Treasury plans to sell $55 billion in bonds to help finance its bank rescue program.
o In its $25 billion auction next week, the Treasury will offer a new type of bond, coined “bail-out” bond, which will reach maturity in
three years, paying a fixed rate of interest every six months.
o The US Treasury expects to earn up to $550 billion by the end of 2008.
http://www.savingsbonds.gov/instit/annceresult/press/preanre/2008/A_20081105_2.pdf
o Bond insurers MBIA and Ambac announce higher losses than analysts predicted.
o The losses, $806.5 million for MBIA and $2.43 billion for Ambac, are likely to produce scrutiny by the credit rating agencies leading to
another possible downgrade in credit ratings.
o There is still doubt on whether bond insurers will be able to participate in the government’s $700 billion TARP (Troubled Asset Relief
Program) but CEO of Ambac, David Wallis, believes they should because the industry is important to the stability of the financial
system.
http://www.bloomberg.com/apps/news?pid=20601009&sid=a6WUFxdnm.pU
o AIG receives a revised $150 billion government bailout plan that will reduce interest payments and give it more time to sell assets.
o The plan increases the total package given to AIG from $123 billion to $150 billion.
o Details of the new deal include 1) a swap of the original $85 billion two-year loan to a new $60 billion five-year loan, 2) an interest rate
reduction of 8.5% over LIBOR to 3% over LIBOR, 3) a purchase of $40 billion in preferred shares that will carry a 10% annual
interest rate, 4) a creation of a new vehicle that will purchase some of AIG credit default swaps from counterparties, and 5) formation
of a second vehicle that will purchase AIG’s mortgage backed securities.
http://www.ft.com/cms/s/0/614586b4-ae9f-11dd-b621-000077b07658.html
o The global credit crisis caused Fitch rating agency to downgrade the emerging markets of Bulgaria, Hungary, Kazakhstan, and Romania.
o Fitch also revised the long-term foreign currency rating of South Korea, Mexico, Russia, and South Africa from stable to negative.
o Fitch reported that eastern European countries were the most exposed to the global credit crisis because of their large current account
deficits and external financing needs.
http://www.ft.com/cms/s/0/68d76a82-af1c-11dd-a4bf-000077b07658.html
o American Express converts to a bank holding company.

o The move will give American Express permanent access to the low-cost Federal Reserve funds.
o In return, American Express will have to submit to stricter regulation and more stringent capital requirements.
o With only $7.2 billion in retail deposits out of $127 billion total assets, American Express may be the first in a trend of bank holding
applications accepted from companies with little retail banking presence.
http://www.ft.com/cms/s/0/2805855a-af91-11dd-a4bf-000077b07658.html
o Treasury Secretary Paulson abandons plan to buy toxic assets under the $700 billion troubled asset relief program (TARP).
o Mr. Paulson said the remaining $410 billion in the fund would be better spent on recapitalizing financial companies.
o Paulson stated the Treasury was evaluating a program that would provide a match of public funds to any funds the financial institutions
were able to raise from private investors.
http://www.ft.com/cms/s/0/6cdb3ee0-b0ef-11dd-8915-0000779fd18c.html
o Standard & Poor’s rating agency downgrades Turkey’s sovereign credit outlook from stable to negative because of its external financing
needs.
o S&P said ratings could stabilize if the Turkish government took actions that ease external financing conditions by tightening policies or
securing creditor support.
o Turkey has been reluctant to go to the IMF for help but outside observers believe this may be inevitable.
http://www.ft.com/cms/s/0/26c93e4a-b24b-11dd-bbc9-0000779fd18c.html
o German chancellor, Angela Merkel, announced proposals to be brought up at the G-20 meeting.
o The findings of a government-commissioned expert panel suggested 1) a world risk map of global financial institutions that would help
to quickly identify future trouble spots, 2) the creation of a central body to oversee credit rating agencies, 3) an international register of
major loans, and 4) better alignment of managers’ pay to discourage short-term risk taking.
http://www.ft.com/cms/s/0/97c3f92e-b245-11dd-bbc9-0000779fd18c.html
o Freddie Mac asks the US government for access to a $13.8 billion lifeline after reporting a quarterly loss of $25.3 billion.
o The lifeline will come from the $200 billion facility promised when the government nationalized Freddie Mac and Fannie Mae.
o Fannie Mae reported a $29 billion quarterly loss and said it might need more than $100 billion to stay in business.
http://www.ft.com/cms/s/0/0d5576c0-b28e-11dd-bbc9-0000779fd18c.html
o The group of 20 of the world’s largest economies meets in Washington DC and releases a statement of the meeting.
o Although no detailed plans were agreed upon, the meeting focused on implementing policies consistent with five principles; 1)
strengthening transparency and accountability, 2) improving regulation, 3) promoting market integrity, 4) reinforcing cooperation, and
5) reforming international institutions.
o The group listed immediate and medium tern action plans for each of the five principles.
http://online.wsj.com/article/SB122675491756631041.html?mod=djemalertNEWS
o The Treasury gives out $33.6 billion to 21 banks in the second round of disbursements from the $700 billion bailout fund.
o This payout brings the total to $158.56 billion so far.
o The Treasury also stressed that the deadline for private banks to apply for help from the fund is December 8, 2008. Private banks were
unable to apply for the funds previously because the bailout included stock purchases.
http://money.cnn.com/2008/11/17/news/companies/tarp_banks/index.htm?source=yahoo_quote
o The US government agrees to rescue Citigroup after an attack by investors caused the stock price to plummet 60% over the last week.
o Under the plan, Citigroup will absorb the first $29 billion of a pool of $306 billion identified toxic assets held by the bank.
o The remaining losses, if they occur, will be covered by three government agencies; the Treasury Department, the Federal Reserve, and
the Federal Deposit Insurance Corporation.
o In exchange for the insurance, Citigroup will give the government warrants to buy shares.
o In addition, the government will inject another $20 billion of capital into Citigroup bringing the total infusion to $45 billion.
http://s.wsj.net/article/SB122747680752551447.html
o The US Federal Reserve pledges $800 billion more to help revive the financial system.
o $600 billion will be used to buy mortgage bonds issued or guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae, and the Federal
Home Loan Banks.
o The other $200 billion will be used to fund the term asset-backed securities loan facility (Talf) which will lend money to holders of
AAA-rated securities that are backed by student loans, auto loans, credit card loans, and small business loans.
o The Treasury will provide $20 billion from the $700 billion troubled asset relief program (Tarp) to provide credit protection in
connection with Talf.
o The announcement caused interest rates on mortgage-backed securities to fall to their lowest levels since January.
http://www.ft.com/cms/s/0/e7411216-bafb-11dd-bc6c-0000779fd18c.html
o The Bank for International Settlements (BIS), the global organization behind the Basel Accord, issues a consultative paper providing
supervisory guidance on the valuation of assets.
o The paper provides ten principles that should be used by banks to value assets at fair market value.
http://www.bis.org/publ/bcbs145.pdf?noframes=1
o The World Bank launches a Debt Management Facility (DMF) to help developing countries prevent debt problems in the future.
o The DMF will focus on helping low income countries achieve debt stability.
o The governments of Austria, Belgium, Canada, The Netherlands, Norway, and Switzerland have made initial commitments of $12
million to the facility.
http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21993683~pagePK:34370~piPK:34424~theSitePK:4607,00.html
o Standard and Poor’s rating agency downgrades Russia to BBB.

o This action marked the first G8 country to be downgraded since the beginning of the credit crisis.
o S&P said they expect Russia’s economic output to decline and downgraded Russia’s credit rating because of depletion of foreign
exchange reserves and possible difficulties in meeting external financing needs.
http://www.ft.com/cms/s/0/a35ce7ea-c592-11dd-b516-000077b07658.html
o Landsbanki, the bank nationalized by Iceland files for Chapter 15 bankruptcy in the US.
o The filing while prevent US creditors from initiating lawsuits while the bank reorganizes.
http://www.bloomberg.com/apps/news?pid=20601085&sid=ahoHJ8w4ZnME&refer=europe
o The Bank of Korea cuts interest rates to 3%, more than twice the expected reduction.
o Korea may be hurt significantly by the global financial crisis because of its high levels of foreign debt.
o Goldman Sachs reports a fourth quarter loss of $2.12 billion.

o This was the first quarterly loss posted by Goldman since it became a publicly traded company in 1999.
o The loss was blamed on declining asset values including real estate holdings.
http://www.ft.com/cms/s/0/404664ca-cb77-11dd-ba02-000077b07658.html
o In a surprise move, the Federal Reserve lowers interest rates to a range of 0-0.25.
o The drop was larger than most analysts expected.
o With the interest rate at near 0, the Fed loses one of its most powerful tools in combating a recession.
http://www.ft.com/cms/s/0/9ecbf5fc-cbd9-11dd-ba02-000077b07658.html
o Norges Bank cuts Norway’s interest rate to 3%.

o Norway’s economy has slowed significantly as the end of the housing boom coincided with the global financial crisis and a drop in oil
prices.
http://www.ft.com/cms/s/0/42c45446-cc8f-11dd-acbd-000077b07658.html
o President George W. Bush announces plans to lend General Motors and Chrysler $17.4 billion to prevent their collapse.
o The White House stated that failure of the Detroit Three (GM, Chrysler, and Ford) could result in 1.1 million workers losing their jobs
and more than a 1% cut in real Gross Domestic Product (GDP) growth.
o $13.3 billion will come from the Troubled Asset Relief Program (TARP) and the loans will come with tough restructuring plans to try
to prevent future trouble.
http://www.ft.com/cms/s/0/c201c044-cdda-11dd-8b30-000077b07658,dwp_uuid=a491f060-b57f-11dd-ab71-0000779fd18c.html
o South Korea announces it will form a $15 billion fund next month to increase the capital ratios of its banks to encourage lending.
o Korean banks will be able to access the fund through selling preferred shares, hybrid bonds, and subordinated bonds to the fund.
o Fund participation will be voluntary with an aim to persuade Korean banks to lend money to businesses that have been affected by the
lack of available credit.
http://www.ft.com/cms/s/0/9018ff6e-cd6e-11dd-9905-000077b07658.html
o Accusations surface by Fortis minority shareholders that the Belgium prime minister, Yves Leterme, along with other government
officials tried to influence a court in the sale of Fortis.
o Belgium’s Fortis branch was nationalized by the government back in September and parts of the bank’s assets were planned on being
sold to BNP Paribas.
o Some minority shareholders were opposed to the sale resulting in a complex legal battle concluding with an appellate judge freezing the
deal last week.
http://www.ft.com/cms/s/0/8047b878-cd6e-11dd-9905-000077b07658.html
o The International Monetary Fund (IMF) outlines a plan to loan Latvia $2.4 billion.
o The loan will be set up as a stand by arrangement to help stabilize Latvia’s financial sector and restore depositor confidence.
http://www.imf.org/external/pubs/ft/survey/so/2008/CAR121908A.htm
o The Bank of Japan cuts Japan’s interest rate to 0.1%.

o The BoJ also said it would start buying commercial paper in an attempt to ease the corporate credit crunch.
http://www.ft.com/cms/s/0/6acbcbbc-cd8a-11dd-8b30-000077b07658.html
o S&P downgrades the credit rating of eleven of the world’s largest banks and says the global crisis could last longer than expected.
o The downgrade included banks in both the US and Europe—JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Morgan
Stanley, Goldman Sachs, Barclays, Credit Suisse, Deutsche Bank, Royal Bank of Scotland, and UBS.
http://www.ft.com/cms/s/0/8b20cc34-ce37-11dd-8b30-000077b07658.html
o In a move to protect the domestic car industry, Russia raises car import duties raising the cost of an imported car by 50%.
o Motorists in 30 cities across the country staged protests in response.
http://www.ft.com/cms/s/0/dc1b5534-cfca-11dd-abf9-000077b07658.html
o Worldwide mergers and acquisitions (M&A) reached $3,280 billion which was down 29% from 2007.
o Companies abandoned 1,309 deals because of financing difficulties, volatility in valuations, and widespread risk aversion.
http://www.ft.com/cms/s/0/d322de98-d056-11dd-ae00-000077b07658.html
o China cuts interest rates to 5.31%, the fifth cut in the last three months.
o The People’s Bank of China also reduced the capital reserve requirement by 50 basis points in an effort to restore China’s high growth
rate.
o Forecasters put China’s GDP growth rate at 5%, down from the 11.9% of 2007.
http://www.ft.com/cms/s/0/c501b5ae-d034-11dd-ae00-000077b07658.html
• January 6, 2009:
o The IMF board is set to approve a $2.5 billion loan to Belarus.

o The loan will help stabilize the Belarus economy that is dependant on foreign financing.
http://www.ft.com/cms/s/0/a040fd84-db91-11dd-be53-000077b07658.html
• January 8, 2009:
o The Bank of England cuts interest rates to 1.5% to help ease the flow of credit to companies.
o This brings the UK interest rate to a 315-year low.
http://www.ft.com/cms/s/0/3be109c8-dd5e-11dd-930e-000077b07658.html
• January 9, 2009:
o Germany takes a 25% stake in Commerzbank through a €10 billion capital injection.
o The bailout is to help Commerzbank shore up its finances and complete the takeover of rival Dresdner Bank.
o Commerzbank is Germany’s second largest lender.
http://www.ft.com/cms/s/0/1a25c35a-dda4-11dd-930e-000077b07658.html
• January 10, 2009:
o Unemployment is the United States jumps to 7.2%, its highest in 16 years.

o 2.6 million jobs were lost in 2008 making it the worst year since 1945.
o Unemployment was at 4.4% before the credit crisis hit.
http://www.ft.com/cms/s/0/ae29f2bc-dedd-11dd-9464-000077b07658.html
• January 14, 2009:
o Standard & Poor’s (S&P) cuts Greece’s credit rating on debt.

o S&P cited the worsening of Greece’s large public debt as the reason for the downgrade.
o Greece is the first major western European country to have its debt downgraded, but Portugal, Spain, and Ireland are being closely
watched by the credit rating agencies.
http://www.ft.com/cms/s/0/9b650d60-e239-11dd-b1dd-0000779fd2ac.html
• January 15, 2009:
o The US government has extended a $138 billion bailout to Bank of America (BofA).
o The bailout includes $20 billion in a capital injection and a guarantee on $118 billion of potential losses on remaining toxic assets.
o BofA will issue the government preferred stock for the capital injection, and take responsibility for the first $10 billion of losses
associated with the pool of toxic assets. The Treasury and FDIC will pick up the next $10 billion in losses, with the remainder to be
absorbed through a Federal Reserve loan.
o BofA is in the process of acquiring Merrill Lynch, which has reported a record loss of $15.31 billion in the fourth quarter of 2008.
http://www.ft.com/cms/s/0/7ebeb6b0-e35c-11dd-a5cf-0000779fd2ac.html
o Ireland nationalizes Anglo Irish Bank, the country’s third largest lender.
o Trading on the bank’s stock was suspended after the share price suffered a drop of 10.8%.
o The share price plummeted after large-scale deposit withdrawals and government intervention to prevent bankruptcy.
o The Irish government said that the bank to will continue to operate as a going concern but most analysts believe it will be wound down.
http://www.ft.com/cms/s/0/964f2e9e-e33f-11dd-a5cf-0000779fd2ac,s01=1.html
• January 16, 2009:
o The US Senate passes, with a vote of 52-42, to release the remaining $350 billion in the Troubled Asset Relief Program (TARP).
o Barack Obama, the US President elect, vowed that this disbursement of TARP funds will be more transparent and accountable than the
first one.
http://www.ft.com/cms/s/0/5910e8ee-e36f-11dd-a5cf-0000779fd2ac.html
o Citigroup announces an $8.29 billion fourth quarter loss.

o The bank also confirmed that it will split its operations into two distinct business sections, one focusing on traditional banking with the
other concentrating on its brokerage business and asset management.
o The split is designed to allow Citigroup to raise private capital without government intervention.
http://www.ft.com/cms/s/0/62649824-e3c8-11dd-8274-0000779fd2ac.html
o The European Central Bank (ECB) cuts interest rates by half a percentage point to 2%.
o This is the lowest interest rate the eurozone has seen in three years.
o The cut was spurred by worsening conditions noted by economic forecasts. The ECB president, Jean-Claude Trichet, said that growth
forecasts released only last month would have to be revised to reflect downward trends.
http://www.ft.com/cms/s/0/77e48de4-e36e-11dd-a5cf-0000779fd2ac.html
• January 19, 2009:
o Gordon Brown announces a bank rescue plan in the United Kingdom.

o The plan has six main components. They are: 1) underwriting toxic assets, 2) altering the terms of the Northern Rock nationalization, 3)
providing guarantees for mortgage-backed securities, 4) providing a £50 billion asset purchase facility for the Bank of England, 5)
establishing a credit guarantee scheme where the Treasury will guarantee debt issued by banks participating in the recapitalization
program, and 6) providng longer access to liquidity for banks who entered the £200 billion Special Liquidity Scheme last October.
o This is the second major bank bailout implemented by the UK, the first was a $400 billion rescue plan announced in October, 2008.
http://www.telegraph.co.uk/news/newstopics/politics/labour/4289849/Gordon-Browns-bank-rescue-plan---what-the-key-measures-really-
mean.html
o Standard & Poor’s (S&P) slashes Spain’s triple A rating (the highest rating available) on debt.
o S&P said that the global financial crisis had highlighted Spain’s structural weaknesses in the economy, which caused it to downgrade
Spain’s rating.
o Spain is the first country with a triple A rating to be downgraded by S&P since Japan in 2001.
http://www.ft.com/cms/s/0/d7ceef24-e625-11dd-8e4f-0000779fd2ac.html
• January 22, 2009:
o A group of nine leading international banks in central and eastern Europe lobby the European Union, the European Central Bank, and
the national governments in the region to address the problems posed by the global financial crisis.
o The group insisted that the solutions to the current crisis must not only be extended to EU member countries in western Europe but also
to the non-EU member states, including prospective member states.
http://www.ft.com/cms/s/0/397e05f0-e826-11dd-b2a5-0000779fd2ac.html
o Bond insurer CIFG cancels $12 billion in credit default swaps (CDSs) in an attempt to boost its capital.
o The CDSs insured risky assets such as collateralized debt obligations (CDOs) that were funded by residential mortgages.
o The CDSs were terminated in exchange for cash and equity in the company.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE50L4XN20090122
• January 23, 2009:
o Reports show the global credit crisis contagion continues to deepen in Asia.
o China announces the slowest growth in seven years, the Bank of Japan reduces economic forecasts for the next two years, and South
Korea reports the first decline in quarterly economic growth since the Asian financial crisis.
o The Bank of Japan admitted it could face contraction and deflation in the next two years.
http://www.ft.com/cms/s/0/9601d0cc-e8ee-11dd-a4d0-0000779fd2ac.html
o The World Bank president Robert Zoellick writes an op-ed piece in the New York Times calling for a worldwide stimulus package.
o Zoellick proposed that the vehicle for the package could be a vulnerability fund managed by the World Bank.
o Zoellick believes that new US President Obama needs to send a message to the rest of the world supporting a worldwide stimulus
package by pledging $6 billion to this fund at the G-20 meeting in April.
http://www.nytimes.com/2009/01/23/opinion/23zoellick.html
• January 24, 2009:
o Citigroup sells $12 billion of government guaranteed bonds in an attempt to strengthen its capital.
o This is the largest bond issue guaranteed by the Federal Deposit Insurance Corporation (FDIC) since the beginning of the financial
crisis.
o The bonds mark the second time that Citigroup has taken advantage of the government-backed facility.
o Since the beginning of the financial crisis, Citigroup has taken more than $50 in credit-related losses.
http://www.ft.com/cms/s/0/95de766e-e9ab-11dd-9535-0000779fd2ac,dwp_uuid=61974342-ba1a-11dd-8c2b-0000779fd18c.html
• January 25, 2009:
o The International Monetary Fund (IMF) announces that it will significantly adjust its forecasts for global economic growth downward.
o So far, the IMF has contributed $50 billion to member countries in response to the global financial crisis but managing director
Dominique Strauss-Kahn expects many more member countries to come to the IMF for help.
http://www.ft.com/cms/s/0/17628d2e-eae7-11dd-bb6e-0000779fd2ac.html
• January 26, 2009:
o Geir Haarde, the prime minister of Iceland, resigns amidst the turmoil created in his country by the global financial crisis.
o Public unrest towards the government in Iceland had been growing since its banking system collapsed last year.
http://www.ft.com/cms/s/0/859eee98-ebbb-11dd-8838-0000779fd2ac.html
o Companies in the United States and Europe announce 76,000 job cuts, resulting in one of the worst days on record for workers.
o Caterpillar led the way by axing 20,000 jobs. General Motors, Sprint Nextel, Texas Instruments and others also cut jobs en masse.
http://www.ft.com/cms/s/0/bb8ec7c0-ebb7-11dd-8838-0000779fd2ac.html
o Fannie Mae and Freddie Mac, the two US government sponsored entities (GSEs) that were nationalized last year, report they will need
up to $51 billion in government funds to continue operations.
o Their losses were blamed on continuing mortgage delinquencies and falling securities values.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE50P7EG20090127
• January 27, 2009:
o Japan announces a $16.7 billion stimulus package to help businesses that have been decimated by the global financial crisis.
o As part of the package, the Bank of Japan plans to inject capital into the markets by buying corporate debt, which will allow businesses
to raise money.
o These measures would most likely help smaller businesses that have had a hard time raising capital because of the worldwide credit
freeze.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE50Q0P120090127
o The Kazakhstan government announces it will buy a 78.14% share in the country’s largest bank, BTA.
o The government said it would acquire BTA shares on a temporary basis only.
o BTA chairman, Mukhtar Ablyazov, claimed that the government’s actions towards BTA “represent abuse of power and corporate
raiding.”
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5111C720090202
o The Federal Reserve extends the currency swaps lines program by six months.
o The program, designed to increase liquidity throughout the world, provides US dollars to 13 central banks.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5126CZ20090203
o The Treasury Department issues restrictions on executive pay for financial institutions that receive government assistance during the
financial crisis.
o Any bank receiving “exceptional assistance” from the US government will be required to limit the pay of senior executives to $500,000
a year.
o The companies will be able to give executives restricted stock above the $500,000 limit but the stock cannot vest until the government
has been completely paid back for the assistance given, with interest.
http://www.ustreas.gov/press/releases/tg15.htm
o Russia announces that it will change its approach to combating the global financial crisis.
o Instead of bailing out individual companies, Russia will attempt to support the economy through the banking sector and limit its deficit
through large budget cuts.
o This news followed a credit downgrade of Russia’s debt by the Fitch rating agency.
http://www.ft.com/cms/s/0/343cf764-f324-11dd-abe6-0000779fd2ac.html
o Regulators close three US banks, bringing the total number of failed US banks to nine in 2009.
o The banks included County Bank of Merced, California; Alliance Bank of Culver City, California; and FirstBank Financial Services of
McDonough, Georgia.
o 25 banks failed in 2008 and were put into receivership. This was a significant increase up from the 3 that failed in 2007.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5156HA20090207
o Job losses in the United States reach 3.5 million in the last 12 months, including 500,000 in January.
o The jobs lost in January represent the highest losses in the US since 1974.
o Half of the total job losses occurred in the last three months.
o The unemployment rate has risen to 7.6%, almost double the 4.4% before the credit crisis.
http://www.ft.com/cms/s/0/84490c96-f4bb-11dd-8e76-0000779fd2ac.html
o Moody’s Investors Service downgrades the credit rating of eight South Korean banks.
o The reason for the downgrades was that the banks depended on the government to secure funding.
o The eight banks included Kookmin bank, Shinhan Bank, Woori Bank, Hana Bank, Industrial Bank of Korea, National Agriculture
Cooperative Federation, Korea Development Bank, and Export-Import Bank of Korea.
o Moody’s downgraded the banks to A2, the same rating as the debt issued by the South Korean government.
http://english.people.com.cn/90001/90778/90858/90863/6588710.html
o RBC Capital Markets released projections which state that more than 1,000 US banks will fail over the next three to five years.
o The analysts forecast that the United States is nowhere near the end of the current crisis and said the current crisis could result in about the
same number of failures (1,386) that occurred during the savings and loans collapse in the 1980s.
o Timothy Geithner, the US Treasury Secretary, introduces the Financial Stability Plan in an attempt to clean up the US financial system.
o The $2 trillion plan includes a financial stability trust to manage the US government’s investments, a public-private investment fund to
clean up the banks’ balance sheets, a consumer and business lending initiative, a small business and community lending initiative, and
housing support and foreclosure prevention plan.
o Commentators have suggested that the Financial Stability Plan is not detailed enough to restore confidence in the financial system.
http://www.financialstability.gov/docs/fact-sheet.pdf
o UBS announces that it lost $17 billion in 2008, the largest corporate loss in Swiss history.
o UBS intends to keep its investment banking division despite cutting 1500-2000 more investment banking jobs.
http://www.ft.com/cms/s/0/5ff56f5a-f741-11dd-81f7-000077b07658.html
o Ireland pledges to inject $9.05 billion into its top two banks.
o In return, the Bank of Ireland and Allied Irish Banks will give the government preferred shares that allow for a 25% voting right over
board appointments and pay an annual dividend of 8%.
o The banks also agree to guarantees on lending, lower executive pay, and mortgage arrears.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE51A89L20090211
o Fannie Mae and Freddie Mac will suspend mortgage foreclosures until March 6th.
o The announcement came before President Obama was scheduled to announce a detailed plan to help prevent more foreclosures.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE51B6B620090213
o The eurozone recession deepens as a 1.5% reduction in gross domestic product is announced for the forth quarter.
o The recession was led by Germany, which saw its economy contract by 2.1%.
http://www.ft.com/cms/s/0/2bd3c74a-fa38-11dd-9daa-000077b07658.html
o Three large US banks―J.P. Morgan Chase, Citigroup, and Bank of America―agree to halt mortgage foreclosures until early March.
o The moratorium on foreclosures is designed to allow the US Treasury to announce a detailed plan to help restructure mortgages to avoid
foreclosure.
o The Group of Seven finance ministers and central bank governors (G7) complete their meeting in Rome.
o The G7 listed four principles that fiscal policy responses should adhere to: “[1] be frontloaded and quickly executed; [2] include the
appropriate mix of spending and tax measures to stimulate domestic demand . . . ; [3] increase longer term growth prospects,
addressing structural weakness through targeted investments; [ 4] be consistent with medium-term fiscal sustainability and mostly rely
on temporary measures.”
o The G7 also warned that protectionist responses to the global financial crisis would only exacerbate the downturn.
http://www.ft.com/cms/s/0/3c07aac2-faa2-11dd-bda0-000077b07658.html
o At the G7 meeting, Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund (IMF) head, warned that the
rest of the world is dangerously close to the recession that has hit the advanced economies.
o Mr. Strauss-Kahn said that the advanced economies now need to turn their attention to cleaning up the banking sector to prevent a
worldwide recession.
o The Japanese government signed an agreement with the IMF to provide an extra $100 billion in funds.
http://www.imf.org/external/pubs/ft/survey/so/2009/NEW021409A.htm
o Japan announces that its economy shrank by 3.3% in the forth quarter.
o This was Japan’s worst performance in 30 years.
http://www.ft.com/cms/s/0/8cb1fbc8-fbc7-11dd-bcad-000077b07658.html
o US President Barack Obama signs a $787 billion economic stimulus package into law.
o The stimulus is designed to jump start the economy and create more jobs by through government spending and tax cuts.
http://www.msnbc.msn.com/id/29231790/
o A study by the Boston Consulting Group shows that the global financial crisis has depleted the market value of the world’s banks by
$5.5 trillion.
o This amount is equivalent to 10% of the world’s gross domestic product.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE51H4Z020090218
o The bond insurer MBIA announces plans to restructure into two companies.
o The new company, National Public Finance Guarantee Corp. (NPFG), will be focused entirely on insuring municipal debt.
o MBIA will transfer $537 billion of its municipal debt to NPFG.
o MBIA lost its AAA credit rating last year because of its exposure to structured finance instruments that were backed by subprime
mortgages.
http://www.ft.com/cms/s/0/2cd9ca9e-fe26-11dd-932e-000077b07658.html
o Fears of nationalization cause US bank stocks to fall to their lowest level since 1992.
o The sell-off of financial stocks pushed the Dow Jones Industrial Average to its lowest point in six years.
http://www.ft.com/cms/s/0/8a163738-fe85-11dd-b19a-000077b07658.html
o The UK injects government funding into Northern Rock for it to engage in a £ 14 billion mortgage sales drive.
o Northern Rock was nationalized by the UK government last year after a run on the bank.
o The mortgage sales drive is aimed at improving the UK housing market and encouraging responsible borrowing.
http://www.ft.com/cms/s/0/bf276e70-011d-11de-8f6e-000077b07658.html
o In a meeting in Berlin, European leaders agree to revamp regulation in response to the global financial crisis.
o The new regulations will focus on cracking down tax havens and implementing stricter oversight of hedge funds.
o The leaders also agree to increase the supervisory role of the Financial Stability Forum and double the amount of funds for the
International Monetary Fund.
o The summit was meant for European leaders to formulate a common stance before the upcoming G20 meeting.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE51L18J20090222
o The US Treasury announces details of the Capital Assistance Program (CAP).

o The CAP plan includes running stress tests on banks to determine if the banks will require additional capital.
o Lending from the CAP will be in the form of preferred shares that will automatically convert to common equity after seven years. This
gives the borrowing banks incentive to pay back the loan before the stock converts.
o Banks that borrow from CAP will also be subject to the executive compensation requirements outlined in the Emergency Economic
Stabilization Act of 2008.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE51O7KU20090225
o The UK government announces a plan to insure $712 billion in toxic assets.

o The Asset Protection Scheme (APS) will be available to banks until March 31.
o The goal of the APS is to increase lending without having to fully nationalize the banking system.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE51P1CO20090226
o Ambac Financial, a large US bond insurer, reports a fourth quarter loss of $2.3 billion.
o Ambac is considering spinning off its municipal insured debt into a separate company called Everspan.
http://www.ft.com/cms/s/0/d362aa28-03a5-11de-b405-000077b07658.html
o The US Treasury announces it will take a 36% stake in Citigroup.

o Instead of injecting new capital into Citigroup, the Treasury will convert its preferred shares into common stock.
o As part of the agreement, Citigroup will replace some of its board of directors with new independent people.
http://www.ft.com/cms/s/0/8d4d59d0-04cb-11de-8166-000077b07658.html
o The UK government releases plans to inject £25.5 billion ($36.5 billion) into the Royal Bank of Scotland (RBS).
o This announcement came after RBS reported the largest corporate loss in Britain’s history—£24.1 billion for 2008.
o RBS will also put £325 billion of its toxic assets into the UK government’s Asset Protection Scheme.
http://www.ft.com/cms/s/0/39f6fdfe-0471-11de-845b-000077b07658.html
o US President Barack Obama releases a 10-year budget outline for the US economy.
o The budget allows for $750 billion of new capital for financial stabilization efforts.
o The budget shows the US deficit quadrupling in 2009 to $1,750 billion.
http://www.ft.com/cms/s/0/70d20bf8-0470-11de-845b-000077b07658.html
• March 1, 2009:
o The US government extends a $30 billion lifeline to AIG.

o The lifeline will be in the form of a standby line of equity that AIG may use to cover its expected losses.
o In return, the government will gain controlling stakes in two of AIG’s largest divisions.
http://www.ft.com/cms/s/0/d748d406-0688-11de-ab0f-000077b07658.html
• March 2, 2009:
o AIG announces a fourth quarter loss of $61.7 billion.

o This loss, equaling around $465,000 a minute, was a record for a US corporation.
o The government lifeline prevented AIG from getting downgraded by the credit rating agencies, a move that could force AIG to come up
with billions of dollars.
http://www.reuters.com/article/GCA-CreditCrisis/idUSN0134457520090303
o HSBC raises $18.1 billion in a rights issue.

o HSBC is Europe’s largest bank and this is Britain’s biggest rights issue.
o HSBC announced it will cut 6,100 jobs in the United States as it shuts down most of its US consumer lending business.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52104W20090302
o The Association of South East Asian Nations (ASEAN) meets to address the global economic crisis.
o This is the first time ASEAN had met since signing the charter last year.
o The goal of ASEAN is to create a regional economic community, similar to the European Union, by 2015.
http://www.ft.com/cms/s/0/f4d5838c-0752-11de-9294-000077b07658.html
• March 3, 2009:
o The US Treasury announces the details on the Term Asset-Backed Loan Facility (TALF).
o TALF will accept AAA asset-backed securities (ABS) as collateral for loans in an attempt to generate lending by unfreezing the ABS
market.
o TALF will begin accepting loan applications on March 17.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5225YY20090303
• March 4, 2009:
o The European Union announces new regulatory requirements for credit rating agencies.
o The proposed regulations will force the credit rating agencies to register and be directly regulated by the EU.
o The measures still need to be voted on by European Parliament and receive formal endorsement by the EU finance ministers.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5235DC20090304
• March 6, 2009:
o The FDIC steps in and closes the Freedom Bank of Georgia, making it the 17th US bank to fail in 2009.
o The bank had $173 million in assets and $161 million in deposits.
o Estimates show the FDIC stands to lose $36.2 million.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52600220090307
• March 9, 2009:
o A study by the Asian Development Bank (ADP) shows that the value of global financial assets tumbled $50 trillion in 2008.
o The losses in Asia alone totaled $9.6 trillion, the highest of any emerging economy.
o ADP said the loss of wealth could equal one year’s worth of global GDP.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5281FN20090309
o The Icelandic Financial Supervisory Authority (IFSA) nationalizes investment bank Straumur Burdaras STRB.IC, the last major
Icelandic bank.
o Straumur’s losses for the fourth quarter were $779 million on loan losses and asset writedowns.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5281S620090309
• March 10, 2009:
o Citigroup’s chief executive, Vikram Pundit, tells employees that Citi has generated $19 billion in revenue over the first two months of
2009.
o After suffering five consecutive quarters of multi-billion dollar losses, Citi is expected to have its best profit performance since the third
quarter of 2007.
http://www.ft.com/cms/s/0/dbb79f02-0d33-11de-8914-0000779fd2ac.html
• March 11, 2009:
o UBS revised its fourth quarter losses, the largest in Swiss history, from $17 billion to $18.06 billion.
o The additional losses included more asset writedowns and a big US tax fine.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52A1DH20090311
• March 12, 2009:
o Bank of America (BoA) CEO, Kenneth Lewis, reports that BoA was profitable in January and February.
o The fourth quarter of 2008 was the bank’s first quarterly loss in 17 years but Lewis expects BoA to be profitable in 2009 without
government help.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52B5DP20090312
o Japan will inject $1.2 billion into regional banks Sapporo Hokuyo, Minami-Nippon, and Fukuho bank.
o Shares in the banks dropped after the announcement.
o The African Development Bank (AfDB) sets up a $1.5 billion emergency bailout fund to help alleviate the impact of the global financial
crisis in Africa.
o The facility was necessary according to AFDB president Donald Kaberuka, despite the departure from AfDB’s main mission of
providing development financing.
http://www.ft.com/cms/s/0/c42209b6-0ea7-11de-b099-0000779fd2ac.html
• March 13, 2009:
o G20 finance ministers meet in southern England to discuss strategies to fix the global economy.
o China promised to support the global economy with its available stimulus tools if necessary.
o The G20 leaders are scheduled to meet in London on April 2nd.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5250LI20090313
• March 17, 2009:
o In February, credit card defaults in the US rise to the highest level in the last 20 years.
o Two of the largest issuers, Citigroup and American Express, reported default rates of around 9%.
http://www.reuters.com/news/archive/GCA-CreditCrisis?date=03172009
• March 18, 2009:
o The Federal Reserve announces that it will buy $300 billion of US government debt in an attempt to bring down US Treasury bond
yields.
o The Fed also announced it would double its purchasing of securities issued by Fannie Mae and Freddie Mac to $1,450 billion.
o The aggressive moves surprised investors and led to higher equity prices.
http://www.ft.com/cms/s/0/15eb2de2-13d8-11de-9e32-0000779fd2ac.html
o The Bank of Japan plans to provide $10.1 billion to large commercial banks in attempt to stabilize their balance sheets.
o The money will come in the form of subordinated loans.
http://www.ft.com/cms/s/0/aedc9ff6-135e-11de-a170-0000779fd2ac.html
• March 19, 2009:
o UBS announces it will buyback $1.3 billion of its bonds in an attempt to boost its capital.
o The buyback will increase their Tier 1 capital ratio, a measure of capital adequacy.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52I2U420090319
o The US Treasury reports it will provide the auto industry with an additional $5 billion in financing.
o The plan, Auto Supplier Support Program, will help suppliers of auto parts continue to remain in business.
o The financing will include government guarantees on shipped parts and allow suppliers to sell their receivables to the government at a
small discount.
• March 20, 2009:
o The National Credit Union Administration (NCUA) seizes two of the top US credit union clearinghouses after announcing a critical
deterioration in the finances of the institutions.
o US Central Federal Credit Union was the top wholesale credit union in the United States with around $34 billion in assets while the
other credit union, Western Corporate Federal Credit Union of San Dimas managed around $23 billion in assets.
o The cost of the regulator takeover will come from a $7 billion industry insurance fund which will likely lead to higher insurance
premiums for the remaining retail credit unions.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52K00Q20090321
o The FDIC revises the fourth quarter losses by the US banking industry upward to $32.1 billion.
o This is the first reported quarterly loss by the US banking industry since 1990.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52J5BG20090320
• March 23, 2009:
o The US Treasury announces details of the Public-Private Investment Program.

o This program is part of the Financial Stability Plan announced on February 10, 2009.
o The program includes using $75 to $100 billion from the Troubled Asset Relief Program combined with private capital to generate $500
billion to buy toxic assets from troubled banks.
o The purchasing power will have the potential to expand to $1 trillion if necessary.
o The program will purchase toxic assets from banks in an auction format with the process overseen by the FDIC.
• March 25, 2009:
o HSBC announces it will cut 1,200 jobs in Britain.

o Union officials estimated the cuts will result in a loss of 2,900 jobs.
o HSBC is Europe’s largest bank with 312,000 global employees.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52O21O20090325
• March 26, 2009:
o Updated commerce department data shows that the US economy fell at its fastest rate since 1982 in the fourth quarter.
o Gross domestic product in the US shrank by 6.3%, slightly better than the 6.6% that was expected.
http://www.ft.com/cms/s/0/9a973c12-19fe-11de-9f91-0000779fd2ac.html
o Global mergers and acquisitions fall by $444 billion in the first quarter of 2009.
o This 33% drop marks the slowest first quarter in six years.
o Lack of confidence in the markets and the global financial crisis have been blamed for the slowdown.
http://www.reuters.com/article/GCA-CreditCrisis/idUSLQ56206720090327
o Fortis Bank Nederland announces a $25.11 billion loss in 2008.

o The bank was fully nationalized by the Dutch government for €16.8 billion, who plan to merge and sell off the bank’s activities by
2011.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52P2RK20090326
• March 28, 2009:
o Norway pledges $4.56 billion of support for the International Monetary Fund to play a larger role in supervising global financial
markets.
o The money will come from a $300 billion fund created by oil and gas revenues.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52R1KY20090328
• March 30, 2009:
o The Bank of Spain rescues the first Spanish financial institution since the financial crisis began.
o The government will provide $11.9 billion in liquidity to Caja Castilla La Mancha (CCM) and replace its directors with central bank
nominees.
o Spain’s finance minister, Pedro Solbes, said this situation was different than when Benesto was nationalized in 1993 because CCM only
accounts for less than 1% of the assets of Spain’s financial system.
http://www.ft.com/cms/s/0/2cab7a26-1cc2-11de-977c-00144feabdc0.html
• March 31, 2009:
o The Organization for Economic Co-operation and Development (OECD) announced projections that world trade will decline by 13.2%
in 2009.
o This would be the worst drop since comparable data has been recorded.
o The OECD also forecasted a 4.3% fall in GDP across its 30-member group with the worst drop in countries that depend heavily on
exports such as Japan and Germany.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52U3R420090331
o The Pakistan central bank confirms that it has received $500 million from the World Bank to help stabilize its economy.
o This money is part of the $10-15 billion international aid package discussed in October, 2008.
o Pakistan still expects to receive future funds from the Asian Development Bank and the IMF.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE52U0ZK20090331
• April 2, 2009:
o The Financial Accounting Standards Board (FASB) announces a relaxation in mark-to-market accounting rules.
o The changes will allow companies more discretion in accounting for toxic assets, allowing banks to value their distressed assets higher.
http://www.fasb.org/action/sbd040209.shtml
o G20 leaders meet in London to combat the global financial crisis.

o The leaders pledge $1.1 trillion to fight the crisis, with $750 billion in additional funding for the International Monetary Fund, $250
billion for world trade financing, and $100 billion for multilateral development banks.
o In addition to the funding, G20 leaders also planned measures for cracking down on tax havens, regulating hedge funds, tougher pay
rules for financial institutions, and regulation of the credit rating agencies.
http://www.ft.com/cms/s/0/5c541a18-1eec-11de-a748-00144feabdc0.html
http://www.londonsummit.gov.uk/resources/en/PDF/final-communique
• April 5, 2009:
o HSBC, Europe’s largest bank, completes a record rights issue of €12.5 billion to stabilize its balance sheet.
o The issue surpassed Royal Bank of Scotland’s €12 billion issue in 2008, previously recorded as the largest in UK history.
http://www.ft.com/cms/s/0/716bc256-21ea-11de-8380-00144feabdc0.html
• April 6, 2009:
o The Federal Reserve creates foreign currency swap agreements with the European Central Bank, the Bank of Japan, the Bank of
England, and the Swiss National Bank.
o Although the Fed is not currently drawing on the swap lines, it has authorized the other four central banks to borrow unlimited amounts
of dollars to meet the needs of local banks.
http://www.ft.com/cms/s/0/eb1f9268-22b6-11de-9c99-00144feabdc0.html
o The Congressional Budget Office (CBO) raises the projected taxpayer cost of the US government’s financial rescue program.
o The analysts originally estimated the Troubled Asset Relief Program would cost the US taxpayers $189 billion but have increased this
forecast to $356 billion.
o The CBO stated that the increase in cost was associated with changes in financial market conditions, new transactions, and timing of
payments.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE53323420090406
• April 8, 2009:
o The Securities and Exchange Commission (SEC) created five new proposals aimed at curbing short selling which has been blamed for
exacerbating the financial crisis.
o One of the five proposals included bringing back the uptick rule, which was abolished in 2007. The uptick rule only allows someone to
short a stock if the last sale price was higher than the one before it.
o The SEC will open the proposals to 60 days of comment by the public before voting to pass them.
http://www.reuters.com/article/GCA-CreditCrisis/idUSN0851681720090408
o The US Treasury announces that certain life insurers have met the qualifications for capital injections under the Capital Purchase
Program (CPP).
o The insurers qualify because of their bank holding company status.
o Giving insurance companies access to the $700 billion TARP funds could alleviate the problems caused by the large drop in the value
of corporate bonds, of which insurers are major investors.
http://www.reuters.com/article/GCA-CreditCrisis/idUSWEQ00086520090408
• April 9, 2009:
o Wells Fargo reports that it will record first quarter profits of $3 billion later this month.
o The profit was more than double what analysts had expected due to a strong showing of its mortgage banking and smooth integration
with its acquisition of Wachovia.
http://www.ft.com/cms/s/0/8cccae00-2516-11de-8a66-00144feabdc0.html
• April 13, 2009:
o Goldman Sachs reports first quarter earnings of $1.81 billion, better than analysts expected.
o Goldman also announced plans to issue $5 billion in stock to repay the $10 billion in federal aid it has received.
http://www.ft.com/cms/s/0/a455df3a-2866-11de-8dbf-00144feabdc0.html
o SEC Chairman, Mary Schapiro, meets with credit rating agencies, investors, and academics about possible changes to the credit rating
industry.
o Among the issues discussed were investor reliance on the credit rating agencies, ways to increase competition in the industry, and
possible new business models for the rating agencies.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE53E72520090415
• April 16, 2009:
o UBS announces an estimated first quarter loss of $1.75 billion and cuts of 8,700 jobs by 2010, more than 11% of its work force.
o The loss, worse than analysts expected, was blamed on further writedowns on illiquid positions and credit losses.
http://www.ft.com/cms/s/0/c209a82c-2983-11de-9e56-00144feabdc0.html
• April 17, 2009:
o Citigroup reports better-than-expected first quarter profits of $1.6 billion.

o This marks Citigroup’s first profit in six quarters.
o Some analysts are concerned that this profit was created by recent changes in accounting rules and Citi cutting back its contribution to
loan loss reserves by $1 billion this quarter.
http://www.ft.com/cms/s/0/253e288c-2b78-11de-b806-00144feabdc0.html
o US President, Barack Obama, announces the appointment of Herbert Allison to oversee the government’s financial stability plan.
o Allison had served as the president and CEO of Fannie Mae after the government took it over in September, 2008.
http://www.whitehouse.gov/the_press_office/President-Obama-Announces-More-Key-Treasury-Appointments/
• April 21, 2009:
o The Global Financial Stability Report, issued by the International Monetary Fund (IMF), increased its estimate on writedowns of US-
originated assets to $2.7 trillion.
o Projections show that total writedowns could reach $4 trillion, with 2/3 coming from the banking industry.
http://www.imf.org/external/pubs/ft/gfsr/2009/01/pdf/text.pdf
• April 22, 2009:
o The World Economic Outlook, issued by the International Monetary Fund (IMF), global activity is predicted to contract by 1.3% for
2009.
o This is significantly higher than the IMF figure released in January of 0.5%.
o This prediction is the worse since World War II.
http://news.morningstar.com/newsnet/ViewNews.aspx?article=/DJ/200904221200DOWJONESDJONLINE000798_univ.xml
http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf
• April 23, 2009:
o Morgan Stanley announces a larger-than-expected first quarter loss of $578 million.

o In response, Morgan Stanley cuts its dividend by 80% in an attempt to increase its capital, a move that will save $1 billion a year.
http://www.ft.com/cms/s/0/0338427e-2f9f-11de-a8f6-00144feabdc0.html
• April 24, 2009:
o G7 finance ministers meet in Washington D.C. to discuss the global financial crisis.
o The G7 said that the world’s economy showed signs of stabilization but reiterated that t is critical to provide the necessary stimulus to
get the financial system running correctly.
http://www.ft.com/cms/s/0/14f38d4c-30fe-11de-8196-00144feabdc0.html
o The FDIC and National Credit Union Administration close four more banks and one credit union bringing the total for the year to 29 so
far. This is significantly higher than the 25 banks in 2008 and 3 in 2007.
o The banks include Eastern Financial Florida Credit Union, First Bank of Beverly Hills in Calabasas, California, First Bank of Idaho in
Ketchum, Michigan Heritage Bank of Farmington Hills, Michigan, and American Southern Bank of Kennesaw, Georgia.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE53O0E020090425
• April 29, 2009:
o The Bank for International Settlements reports that global cross-border lending between banks fell by almost $5 trillion from March to
December 2008.
o This 9 month drop is the largest on record.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE53S3MQ20090429
o Preliminary data from the US commerce department show the US economy contracting by 6.1% in the first quarter of 2009.
o The data is worse than the 4.7% analysts expected but better than the 6.3% contraction on the fourth quarter of 2008.
http://www.ft.com/cms/s/0/06299c8e-3437-11de-9eea-00144feabdc0.html
• April 30, 2009:
o US car maker, Chrysler, files for Chapter 11 bankruptcy protection in New York.
o Chrysler also announced a partnership with Italy’s Fiat.
o This will mark Fiat’s reentrance into the US car market, which it had previously abandoned.
http://www.ft.com/cms/s/0/76ccd92c-3588-11de-a997-00144feabdc0,dwp_uuid=a491f060-b57f-11dd-ab71-0000779fd18c.html
• May 1, 2009:
o Regulators seize Silverton Bank of Atlanta, a bank who provided services to other banks.
o This is the largest bank failure so far in 2009, with $4.1 billion assets.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5406FS20090502
o The US Federal Reserve announces that it will allow commercial mortgage backed securities (CMBS) issued in 2009 to be used as
collateral for receiving a loan from the Term Auction Loan Facility (TALF).
o This inclusion is expected to improve the commercial property sector which has been decimated by the global financial crisis.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5406GC20090501
• May 3, 2009:
o East Asia announces plans to create a $120 million emergency fund to help the countries withstand the global financial crisis.
o Japan and China will provide 32% of the funds, South Korea 16%, and the remaining amount to be contributed by the Association of
South East Asian Nations (ASEAN).
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5420L220090503
• May 4, 2009:
o A US Federal Reserve survey reports that mortgage demand rose in the first quarter for the first time since early 2007—before the
subprime mortgage crisis began.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5435X020090504
• May 7, 2009:
o Stress test results for the 19 largest U.S. banks are released. The results are more encouraging than anticipated.
o 9 of the banks tested, including JP Morgan Chase, Goldman Sachs and MetLife, are found to be adequately capitalized.
o The tests also expose the 10 most troubled institutions. GMAC, Wells Fargo, Bank of America and Citigroup, as well as several large
regional banks like Keycorp and SunTrust Banks, lacked the capital to withstand the worst-case scenario simulations. These banks
must prepare capital-raising plans by June 8, to be implemented by November 9.
o Some analysts remain wary. Under worst-case assumptions, experts put potential losses at $600 billion and the likely mortgage failure
rate at 1 in 10.
http://www.nytimes.com/2009/05/08/business/08bank.html?_r=1&scp=2&sq=stress%20test%20results%20may%207&st=cse
http://www.reuters.com/article/americasRegulatoryNews/idUSN1154040620090511
• May 9, 2009:
o Global stocks and crude oil prices rise in response to optimistic stress test results. Oil closes out at $58 a barrel, close to a six-month
high.
http://www.reuters.com/article/companyNewsAndPR/idUSN0953236820090509
• May 13, 2009:
o U.S. Treasury releases proposals to regulate OTC derivatives. Aims include amending the Commodity Exchange Act (CEA) to include
larger margin requirements and stronger risk controls as well as increased authority to police fraud and manipulation.
http://www.financialstability.gov/latest/tg_05132009.html
• May 20, 2009:
o Bank of America takes a large step toward meeting capital-raising requirements, reporting $13.47 billion raised through a share sale.
o Ten other U.S. banks are continuing to raise capital through the sale of common shares and non-guaranteed government debt. State
Street Corp received $2.2 billion selling common stock while Citigroup sold a controlling stake in its Smith-Barney unit to raise $6.5
billion in capital. Keycorp intends to sell $750 million in common shares.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE54I77V20090520.
• May 28, 2009:
o The launch of the Public Private Investment Program (PPIP) is stalled by recovering markets. Treasury officials still expect a launch in
late June or early July but the whole loans portion of the effort, which involves over $1 billion in whole loans backed by the FDIC,
may be postponed.
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE54R7E420090528
• June 1, 2009:
o General Motors files for Chapter 11 bankruptcy protection. It is the largest manufacturing bankruptcy in American history.
http://www.nytimes.com/2009/06/02/business/02primer.html?ref=business
• June 2, 2009:
o Stock markets in emerging economies are experiencing a strong resurgence. Since its March 2009 low, the MSCI emerging markets
index has gained 68 percent, compared with a 43 percent gain in the developed markets index.
http://www.reuters.com/article/newsOne/idUSTRE55131G20090602
• June 3, 2009:
o First quarter economic reports provide continued cause for concern but also signs of improvement.
o Euro zone GDP, feeling the drag of a 4 percent contraction in the German economy, experiences a 2.5 percent decline overall. This
continued downturn marks the worst recession in continental Europe since World War II.
o The U.S. reports an increase in new factory orders while real GDP remains in decline, though now falling at a slower rate than in the
final quarters of 2008. Fed officials cite rising U.S. debt as problematic.
o Emerging economies lead the world in stock market recovery but still suffer from significant reductions in capital flow, export demand,
and foreign investment.
http://www.ft.com/cms/s/0/559213f8-411d-11de-bdb7-00144feabdc0.html?nclick_check=1
http://www.reuters.com/article/companyNews/idUSSP47134820090603
o JP Morgan announces that global business activity, as measured by its Global Total Output Index, contracted at its slowest pace in eight
months in May. An upturn in the global manufacturing index was offset by an accelerated downturn in services activity.
http://www.reuters.com/article/companyNewsAndPR/idUSL3103747320090603
o U.S. banks generate more capital than required by regulators, selling common stock and nonguaranteed debt to raise more than $85
billion since May 7. Mutual funds and other large institutional investors are buying aggressively and stock prices reflect the improving
climate. Bank of America shares are up 263 percent from their March low, JP Morgan is up 118 percent.
• June 10, 2009:
o 10 banks are allowed to exit the U.S. TARP program.

o The first to exit include American Express, Goldman Sachs, Morgan Stanley and JPMorgan Chase. Combined, they will return $68.3
billion, more than a quarter of the federal bailout money issued by TARP since October 2008.
http://www.reuters.com/article/bigMoney/idUS132273542420090610
o China questions the role of the dollar as the international reserve currency, arguing for the diversification of national currencies used as
reserves. Chinese leaders propose expanding IMF Special Drawing Rights for use as reserve currency.
o U.S. Treasury Secretary Tim Geithner responds with confidence about the dollar’s stability. He says the U.S. is committed to keeping
inflation under control and maintaining the dollar’s status as a reserve currency.
http://www.ft.com/cms/s/0/f2236be4-6239-11de-b1c9-00144feabdc0.html
• June 13, 2009:
o The G8 convenes for a summit in Lecce, Italy.

o G8 leaders agree on fragile economic recovery but clash on post -crisis exit strategies and the possibility of stress tests for European
banks. The U.S. and Canada push for greater transparency in the face of the steepest decline in Euro Zone history: a 21.6 percent drop
in industrial production.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aq3lMVEOm878
http://www.ft.com/cms/s/0/d1b1fad0-57b0-11de-8c47-00144feabdc0.html
• June 16, 2009:
o The European Central Bank publishes its Financial Stability Review, saying Euro Zone banks will need to write down $283 billion more
by the end of next year.
o Most large European banks seem adequately capitalized, but risks to financial stability “remain high”. Rising corporate default and
falling property prices in Eastern Europe give cause for concern.
o ECB staff expect Euro Zone output to shrink by 4.6% this year.
• June 17, 2009:
o BRIC country leaders (from Brazil, Russia, India and China) convene in Yekaterinburg, Russia for one-day summit.
o BRIC countries account for 40 percent of the world’s population and 15 percent of its economy.
o The BRIC countries seek a greater voice in the global economy and a more diversified approach to its management, voicing criticism of
the U.S. dollar’s role as reserve currency and calling for comprehensive reform of the United Nations. BRIC leaders mean to “send a
message to Washington” about the economic interests and representation of emerging economies.
• June 18, 2009:
o President Obama reveals a dramatic overhaul of way the U.S. government oversees financial markets. The sweeping changes, criticized
by some as too hasty, aim to promote innovation while discouraging abuse. They propose:
For the Supervision of Financial Institutions
o A new Financial Services Oversight Council of financial regulators to identify emerging systemic risks and improve interagency
cooperation.
o New authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own
banks.
o Stronger capital and other prudential standards for all financial firms, and even higher standards for large, interconnected firms.
o A new National Bank Supervisor to supervise all federally chartered banks.
o Elimination of the federal thrift charter and other loopholes that allowed some depository institutions to avoid bank holding company
regulation by the Federal Reserve.
o The registration of advisers of hedge funds and other private pools of capital with the SEC.
For the Regulation of Financial Markets
o Enhanced regulation of securitization markets, including new requirements for market transparency, stronger regulation of credit rating
agencies, and a requirement that issuers and originators retain a financial interest in securitized loans.
o Comprehensive regulation of all over-the-counter derivatives.
o New authority for the Federal Reserve to oversee payment, clearing, and settlement systems.
For Consumer Protection
o A new Consumer Financial Protection Agency to protect consumers across the financial sector from unfair, deceptive, and abusive
practices.
o Stronger regulations to improve the transparency, fairness, and appropriateness of consumer and investor products and services.
o A level playing field and higher standards for providers of consumer financial products and services, whether or not they are part of a
bank.
For Government Management of Financial Crisis
o A new regime to resolve nonbank financial institutions whose failure could have serious systemic effects.
o Revisions to the Federal Reserve’s emergency lending authority to improve accountability.
For Improved International Regulatory Standards and Cooperation
o International reforms to support our efforts at home, including strengthening the capital framework; improving oversight of global
financial markets; coordinating supervision of internationally active firms; and enhancing crisis management tools.
http://online.wsj.com/article/SB124524649229423271.html#mod=djemalertNEWS
http://www.financialstability.gov/roadtostability/regulatoryreform.html
o Treasury Secretary Tim Geithner will chair the administration’s planned “council of regulators”. The Council, composed of eight heads
of the top regulation organizations, would co-ordinate policy and advise the Federal Reserve on emerging risks.
http://www.ft.com/cms/s/0/06b3749c-5b9f-11de-be3f-00144feabdc0.html
• June 20, 2009:
o The European Union approves a plan to create a European Systemic Risk Council for financial regulation. The Council will have an
advisory role, leaving enforcement in the hands of national governments.
o European Central Bank leaders criticize the compromise plan, insisting that the Systemic Risk Council (to be headed by the president of
the ECB) should have the ability to act on its own recommendations.
• June 24, 2009:
o Russia’s RTS index has fallen 21 percent since its peak on June 2. The FTSE All World Emerging index has, by contrast, dropped only
9.7 percent since June 1. Forecasters predict a contraction in the Russian economy of more than 7 percent this year.
http://www.ft.com/cms/s/0/55956528-6024-11de-a09b-00144feabdc0.html
• June 25, 2009:
o The BEA releases revised first-quarter figures for the U.S. economy: GDP declined by an annualized rate 5.5 percent, considerably
better than the original estimate of 6.1 percent. Output is beginning to pick up as manufacturing and housing markets show signs of
life. Unemployment reached 9.4 percent in May and is expected to climb to 9.6 percent in June.
http://www.ft.com/cms/s/0/453a5a72-618b-11de-9e03-00144feabdc0.html
http://www.ft.com/cms/s/0/f3c99d60-6248-11de-b1c9-00144feabdc0.html
o The European Central Bank lends a record $622 billion to Euro Zone banks at the ECB current key rate of 1 percent.
o The one-year loans reflect continued funding problems in Euro Zone banks, expectations that the region’s economy will begin
recovering this year, and the ECB’s commitment to bolster European banks even while other policymakers attempt to wind down
stimulus spending.
[*] The entries in this timeline are drawn directly or indirectly from press reports cited in the timeline

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CREDIT CRISIS TIMELINE[*]

THE UNIVERSITY OF IOWA CENTER FOR INTERNATIONAL FINANCE & DEVELOPMENT

Last updated: July 1, 2009

o Greenspan lowers Fed’s key rate to 1%, the lowest in 45 years

o Lenders make $640 billion in subprime loans

• August 26, 2006:

o Ownit Mortgage Solutions Inc. files for Chapter 11.

o Mortgage Lenders Network USA Inc. files for Chapter 11.

• February 10, 2007:

• February 13, 2007:

• March 20, 2007:

o People’s Choice Home Loan files for Chapter 11.

o New Century Financial files for Chapter 11.

• April 12, 2007:

o SouthStar Funding LLC files for Chapter 7.

• June 22, 2007:

• June 27, 2007:

• July 16, 2007:

o Alliance Bankcorp files for Chapter 7.

• July 17, 2007:

• July 18, 2007:

• July 24, 2007:

• July 31, 2007:

o American Home Mortgage files for Chapter 11.

• August 10, 2007:

o HomeBanc files for Chapter 11.

• August 16, 2007:

• August 17, 2007:

o Bear Stearns cuts 240 jobs in the mortgage origination department.

• August 24, 2007:

• August 26, 2007:

• August 28, 2007:

• September 14, 2007:

• September 21, 2007:

• September 26, 2007:

o UBS announces a $3.7 billion write down.

o Morgan Stanley cuts 600 jobs.

• October 11, 2007:

• October 16, 2007:

• October 17, 2007:

• October 23, 2007:

• October 25, 2007:

o Merrill Lynch announces a $2.24 billion loss in the third quarter.

• October 26, 2007:

• October 31, 2007:

• November 12, 2007:

• November 13, 2007:

• November 15, 2007:

• November 16, 2007:

• November 21, 2007:

• November 23, 2007:

• November 27, 2007:

o Citigroup raises $7.5 billion from Abu Dhabi government.

• November 29, 2007:

o Bear Stearns cuts 650 more jobs.

• December 10, 2007:

• December 12, 2007:

• December 14, 2007:

• December 18, 2007:

• December 19, 2007:

• December 20, 2007:

• December 21, 2007: