It’s been five years since the beginning of the financial crisis forever changed the trajectory of American banking — and American history.
From Lehman’s collapse to AIG’s bailout, September and October of 2008 were, simply put, absolutely nuts.
To celebrate the five-year-anniversary, we take a walk down memory lane with a cast of familiar faces.
FEB 8, 2007: HSBC says that its bad debt provisions for 2006 will be 20% higher than expected thanks to a slump in the U.S. housing market. Normal people begin to learn what subprime is.
APRIL 2, 2007: New Century files for bankruptcy. It was the largest subprime lender in the United States.
JUN 21, 2007: Merril Lynch sells off assets in two Bear Stearns hedge funds as the funds hemorrhage billions of dollars on bad subprime bets.
AUG 9, 2007: France's largest bank, BNP Paribas, freezes withdrawals from three investment funds after U.S. subprime mortgage losses crush markets. 'The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating,' BNP said in the release.
SEP 4, 2007: Libor -- the interbank interest rate -- hits 6.7975%, its highest level since December 1998.
OCT 24, 2007: Merrill Lynch announces an $US8.4 billion quarterly loss, the largest in its history, thanks to write-downs on subprime mortgages.
OCT - NOV 2007: Many CEOs would not make it through the financial crisis. Stan O'Neal at Merrill and Chuck Prince at Citigroup both bite the dust, departing in shame but with monster severance packages. O'Neal, for one, walked out with $US161.5 million.
DEC 11, 2007: The FOMC reduces the federal funds rate to 4.25% and cuts the primary credit rate to 4.75%.
MAR 16, 2008: JP Morgan Chase buys Bear Stearns for $US2 a share in a fire sale (later it would be $US10 a share). The Federal Reserve finances the deal, providing $US30 billion so Bear doesn't go bankrupt.
2008: Insurers like MBIA, who have written against the failure of CDOs, get downgraded and collapse. Hedge funder Bill Ackman would reportedly make his investors over a $US1 billion on a short position.
SEP 7, 2008: The saga of Fannie Mae and Freddie Mac, guarantor of half of U.S. mortgages, culminates with a takeover by the U.S. government.
SEP 16, 2008: For only the second time in history, a money market fund 'breaks the buck' and reports shares' value below $US1. Americans run on money market funds, long considered safe havens, en masse. $US140 billion has been withdrawn year-to date.
FALL 2008: Longstanding banking giants like Wachovia and Washington Mutual begin to disappear as they are bought by other banks for pennies on the dollar.
SEP 29, 2008: The U.S. House of Representatives defeats a proposed $US700 billion emergency bailout package 228-205. Stocks collapse as the votes are counted live.
OCT 16, 2008: Warren Buffett authors a New York Times op-ed called 'Buy American. I Am.' He gets absolutely crushed by critics when markets crash further. Rising stock prices in the post-crisis years would later vindicate him.
OCT 2008: Commentators wonder if this is the end of life as we know it. 'The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism,' wrote the Washington Post's Anthony Faiola. Simon Jenkins at the Guardian called this line of thinking 'journalistic wish-fulfillment and glee.'
NOV 2008 - SPRING 2009: The Financial Crisis continues, crippling employment. Eventually the stock market bottoms on March 9, 2009 at 6,547.05.
Banks would continue to report losses, fight regulation efforts, and eventually stomach higher capital requirements.
Eventually, thanks to extraordinary bailouts from the Fed and the Congress the market bottomed and the economy slowly recovered.
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