Chronology Of The Subprime Crisis And The Financial Crisis
LexInter | October 23, 2008 | 0 Comments

Chronology Of The Subprime Crisis And The Financial Crisis

February 8, 2007 HSBC launches the first “profit warning” in its history and indicates that delinquencies on high-risk mortgages would cut $ 10.5 billion from its annual profits

Information is spreading that ” subprime ” borrowers are in default. The Federal Reserve estimates the losses at $ 50 billion . A year later, she estimated them at € 400bn

 

MARCH 2007  
March 8, 2007 New Century Financial Corporation, the second American credit institution specializing in subprime , indicates that it no longer accepts credit applications, being unable to refinance

 

March 23, 2007 Kensington, leader in risky mortgage lending in Great Britain, issues a severe warning on its results.

 

APRIL 2007  
April 2, 2007 New Century Financial Corporation, number of the ” subprime ” goes under the protection of a Chapter 11 procedure

 

MAY 2007  
May 22, 2007 Launch of the LCDX index

 

JUNE 2007  
June 1, 2007 CAC, DAX and S&P indices at their highest
June 29, 2007 Bear Stearns is forced to offer $ 3.2 billion to save a losing hedge fund given mortgage default rates. The three rating agencies maintain ratings of $ 200 billion, which however do not meet the rating criteria set when issuing the securities.

 

 

JULY 2007  
July 17, 2007 The Dow Jones crosses 14,000 points for the first time in its history
July 18, 2007 Bear Stearns ‘ two ” hedge funds ” have lost all value. Bear Stearns was founded in 1923, it had weathered the crisis of 1929 and was a pillar of Wall Street
July 19, 2007 S&P downgrades 418 securities linked to ” subprime “
July 26, 2007 The financial centers are loosening under the effect of the subprime crisis in the USA; The CAC 40 loses 2.78%, the FTSE 100 loses 3.5% and the Dow Jones 2.26%
July 31, 2007 Support from German bank KfW to IKB Deutsche Industriebank ($ 79 billion in assets) which issued a profit warning

 

 

AUGUST 2007  
August 1, 2007 German finance minister announces € 3.5bn bailout to avert IKB bankruptcy
August 2, 2007 Oddo closes three so-called “dynamic monetary” funds
August 6, 2007 Bear Stearns No.2 resigns

 

Bankruptcy of American Home Mortgage , then of Home Bank and First Magnus Financial
Aug 9, 2007 BNP Paribas temporarily closes three of its investment funds invested in the USA in securitized real estate assets whose outstanding amount has decreased by € 400 million
The CAC 40 loses 2.17% and the Dow Jones 2.83%
Interbank rates are soaring. The authorities fear that the interbank market will dry up.

The ECB injects € 24.8 billion into the monetary circuit and the FED $ 24 billion. The ECB declares itself ready to satisfy 100% of the banks’ demands; Between August 9, 2007 and August 10, 2007 the ECB will put 150 billion euros on the market and the Fed 62 billion dollars

Aug 13, 2007 Goldman Sachs injects $ 3 billion into one of its funds
August 17, 2007 The US Central Bank lowers its discount rate from 6.25% to 5.75%
The CAC 40 lost 3.13% and ended at its lowest level of the year, closing at 5,217 points
  The American, British and European central banks together inject $ 330 billion into the monetary system
22 Aug 2007 Lehman Brothers closes BNC Mortgage subsidiary
23 Aug 2007 Bank of America invests $ 2 billion in Countrywide Financial

 

SEPTEMBER 2007  
September 14, 2007 Thousands of English people line up in front of the Northern Rock bank branches and withdraw £ 1bn in 24 hours. Northern Rock is a former ” building society “. The Bank of England, which had not been called upon to act as a lender of last resort since 1970; grants a state guaranteed loan of £ 25bn. Northern Rock is number 5 in mortgage lending in the UK, 75% of its funding comes from the money market. It has $ 216.8 billion in assets.
September 14, 2007 UBS to spend 2.4 billion euros on US mortgages
September 18, 2007 The Fed cuts its main policy rate by half a point to 4.75%
September 19, 2007 US Central Bank lowers discount rate to 4.75%
September 29, 2007 Merril Lynch, Wall Street’s third largest bank, reports a loss of $ 2.24 billion, its first in six years. Two weeks earlier the bank predicted asset write-downs in the fixed-income trading division of $ 5.5 billion, underestimating them by $ 2.5 billion. Merril Lynch CEO Stanley O’NEal must resign.

 

 

OCTOBER 2007  
October 1, 2007 Citigroup reports a 60% drop in third quarter profit. UBS announces asset write-downs for CHF 4 billion.
October 29, 2007 Resignation of Stanley O’Neal, CEO of Merril Lynch, who lost $ 2.24 billion
October 31, 2007 The euro is above $ 1.45
October 31, 2007 Fed rate cut by 0.25 points

 

 

 

NOVEMBER 2007  
November 4, 2007 Resignation of Charles Prince, CEO of Citigroup
November 7, 2007 Historic record for the euro which crosses the threshold of $ 1.47
Historic record for a barrel of oil in NY which crosses 98 $
November 14, 2007 The Florida State Pension Fund announces that of the $ 50 billion in short-term investments managed, € 2.2 billion are now considered speculative investments. Most of these securities are asset backed commercial paper with a maturity of one year. They were acquired when they had a good rating. They were downgraded by rating agencies following the financial crisis. As these securities are now downgraded and relegated to junk bonds, they should not be kept under state pension fund regulations, but they can hardly be sold. led to the Orange County bankruptcy in 1994
November 27, 2007 Abu Dhabi sovereign wealth fund takes 5% of Citigroup and contributes $ 7.5bn

 

 

DECEMBER 2007  
Beginning of December 2007 At the beginning of December, AIG said that the “subprime” crisis was now under control. AIG announced that the stock market turmoil following the bursting of the housing bubble had cost it $ 352 million at the end of November. AIG will have to considerably revise the estimate of this loss in February 2008
December 11, 2007 0.25 points cut in the Fed rate
December 12, 2007 Five central banks (ECB, FED, BoE, Bank of Canada and Swiss National Bank) are launching concerted action to tackle the liquidity crisis. They provide $ 90 billion in short-term financing for the banks.
December 18, 2007 The ECB injects $ 500 billion into the financial system. Bank of England auctiones $ 20bn in three-month loans

 

 

JANUARY 2008  
January 8, 2008 Bear Stearns CEO James Cayne resigns
January 17, 2008 Merril Lynch reports a loss of $ 9.8 billion in the 4th quarter, as much as Citigroup
January 18, 2008 George Bush announces $ 150 billion stimulus package
January 21, 2008 Sharp decline in global stock markets
January 22, 2008 Fed rate cut by 0.75 points. The main rate is 3.50%
January 24, 2008 Société Générale announces a loss of € 6.9bn., € 2bn due to the subprime crisis and $ 4.9bn due to Jérome Kerviel’s operations
January 30, 2008 0.50 point Fed rate cut

 

FEBRUARY 2008  
February 11, 2008 AIG announces valuation problems for its derivatives portfolio. . AIG revises losses announced in December 2007 up to $ 5.23 billion. The loss for the whole of 2007 announced at the end of February could even be even higher insofar as the latest estimate does not yet take into account the month of December. The group must recognize that its auditors wished to express reservations about the reliability of its accounting methods. AIG believes that it has taken sufficient measures to properly value its investments in CDO-type products and various hedging products, but investors are visibly worried and the stock is falling. Rating agencies have warned that they risked lowering the price. insurer’s note
Cost of purchasing investment grade corporate default protection rises to 135 basis points
The LCDX index which tracks the value of high-risk US loans drops to an all-time low of 90.8
The Federal Reserve estimates the losses on subprime at $ 400 billion , eight times the estimate of € 50 billion made a year earlier. Banks only reported losses of € 120 billion.
February 15, 2008 UBS lost 12.4 billion Swiss francs in the 4th quarter
   

 

 

MARCH 2008  
March 7, 2008 The Federal Reserve offers 200 billion 28-day loans to banks and financial institutions
March 11, 2008 Federal Rserve offers investment banks 200 billion in MBS scaffold treasury bills
March 12, 2008 The losses linked to the subprime are estimated at $ 2,000 billion
March 13, 2008 Carlyle Capital Corporation (CCC), created in 2006 by Carlyle Group to speculate on securities backed by American mortgage loans, announces its probable bankruptcy, given $ 17 billion of insufficiently guaranteed debt
March 14, 2008 Fed grants 28-day emergency loan to Bear Stearns, arranges JP Morgan buyout with collateral
March 16, 2008 JP Morgan buys Bear Stearns ($ 399 billion in assets). Bear Stearns shares fell 83.41%. The price announced for the purchase of Bear Stearns is $ 2 per share, 1% of its value two weeks earlier

 

Bear Stearns Collapse Impact: Charles Schwab Citigroup Fed

 

 

March 16, 2006 Merril Lynch shares lost 40%
March 18, 2008 Fed rate cut from 0.75% to 2.25%
March 21, 2008 The ECB is offering $ 24 billion in loans to help banks; Bank of England offers $ 10 billion in loans

 

APRIL 2008  
April 1, 2008 Deutsche Bank, which had spent $ 759 million in depreciation over the 2007 financial year concerning the € 36 billion LBO debt, warns that the depreciations could reach for the first quarter of 2008 € 2.5 billion
Resignation of Marcel Ospel, CEO of UBS
April 2, 2008 UBS capital increase of 15 billion Swiss francs
Lehman Brothers capital increase of $ 4 billion
April 15, 2008  
Wachovia, retail bank, fourth American bank, announces a recapitalization of more than $ 7 billion to face its diversification in real estate. This capital increase is necessary when the bank had two months previously carried out a capital increase of $ 3.5 billion.

Wachovia had taken over a mortgage specialist, Golden West Financial, for $ 24.6 billion in 2006.

Deutsche Bank is seeking to sell between $ 15 billion and $ 20 billion in loans granted to finance leveraged operations. The transfers would be made to private equity funds.

At the end of 2007, DB had € 36bn in LBO credits under syndication, of which 15bn have been granted and 21bn are commitments. DB is the bank with the most exposure in leveraged finance, ahead of Citigroup, Credit Suisse and JP Morgan. The financial crisis left DB, like Citigroup, with debts that they could not place with traditional investors, the buyers of CDOs having disappeared.

According to an analysis by BNP Paribas, banks still have $ 200 billion unspent on their balance sheet, including $ 55 billion at DB and $ 43 billion at Citigroup.
The subprime crisis costs $ 5.6 billion to the Japanese bank Mizuho
FGIC recorded a loss of $ 1.89 billion in the fourth quarter of 2007, twenty times its turnover
April 18, 2008 Merril Lynch spent $ 9bn in asset write-downs in the first quarter of 2008. The bank announced on April 17 a net loss of $ 1.9bn.

Asset write-downs include 1.5bn on asset-backed securities, 3.5bn on mortgage-linked securities, 1bn on loans granted to investment funds and $ 3bn related to the difficulties of enhancers credit

 

MAY 2008  
May 13, 2008 Crédit Agricole SA capital increase of € 5.9 billion

 

JUNE 2008  
June 6, 2008 AIG Announces Decision to Cooperate with SEC Investigation into its Mortgage-Related Securities Valuation Practices
June 9, 2008 Lehman Brothers announces a loss of 2.8 billion dollars in the second quarter of 2008. Six billion dollars are raised
June 25, 2008 Barclays capital increase of € 5.7 billion

 

JULY 2008  
July 01, 2008 Bank of America formalizes the acquisition of Countrywide Financial for $ 2.5 billion. The forecast price in January of $ 4 billion has been revised downwards in view of the increase in foreclosures and the fall in stock prices.

 

July 11, 2008 California bank Indymac is bankrupt
July 13, 2008 The American authorities decide to support Fannie Mae and Freddie Mac in order to stop the onset of panic from the week of July 7 to 12, 2008. During the week the share of Freddie Mac fell by 47% and that of Fannie Mae by 45%
July 29, 2008 Merril Lynch sells more than 30 billion “toxic” assets and raises $ 8.5 billion
July 30, 2008 Signature by George Bush of the $ 300 billion real estate rescue plan voted by the US Congress

 

AUGUST 2008  
Aug 10, 2008 UBS, Citigroup and Merrily Lynch agree to buy back auction bonds from their clients for $ 40 billion ( Auction Rate Securities ARS )

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August 26, 2008 The Federal Deposit Insurance Corporation’s “blacklist”, which insures the deposits of the 8,600 banks it supervises, expands to 117 names
August 29, 2008 Integrity Bank is the tenth American regional institution to go bankrupt.

 

SEPTEMBER 2008  
September 7, 2008 The Fed pledges $ 100 billion in support for Fannie Mae and Freddie Mac . The Treasury gives Fannie Mae and Freddie Mac the opportunity to acquire MBS ( Mortgaged Backed Securities ).
September 10, 2008 Lehman Brothers announces $ 3.9 billion in losses for its third quarter. Lehman Brothers sells its asset management and splits its commercial real estate
September 14, 2008 The Fed refuses to give its guarantee to Barclays or Bank of America, which were candidates for the takeover, as JP Morgan had had for Bear Stearns.

Lehman Brothers files for bankruptcy proceedings failing to get Fed help or find a buyer

 

September 15, 2008 Bank of America buys Merril Lynch for $ 50 billion

 

Nightmare on Wall Street Lehman Collapses, Merrill Lynch sold. $ 700 billion evaporated from retirement plans, government pension funds  

September 17, 2008 Reserve Primary Fund announces that its net asset value is less than $ 1 per unit
The Dow Jones plunges 4.06%. Morgan Stanley and Goldman Sachs lose 26.2% and 13.9% respectively
The US Treasury agrees to fund AIG to the tune of $ 85 billion in exchange for 85% of its shares. It is estimated that the bankruptcy of AIG would have resulted in $ 180 billion in losses for banks and institutions in operations with AIG
September 18, 2008 The Federal Reserve, the ECB, the Bank of England and the central banks of Canada and Switzerland offer $ 180bn in foreign exchange swaps
September 20, 2008 The US government announces the creation of a defeasance structure with $ 700 billion to buy rotten bank assets.
September 22, 2008 Mitsubishi UFJ Financial Group invests $ 8.5 billion in Morgan Stanley and takes a stake which may rise to 20% of the bank’s capital

________________

 

September 23, 2008 The ECB injects $ 40 billion into the euro area as part of joint measures with the Federal Reserve to calm the markets
September 24, 2008 Goldman Sachs raises $ 10 billion, Warren Buffett, through his holding company Berkshire Hathaway providing € 5 billion by subscription of preferential shares giving him access to a dividend of 10% and receiving options allowing him to buy $ 5 billion of shares at the price of $ 115 per share.
The FBI confirms that it has launched an investigation into the American financial community. SEC Advances In Investigation, Cites Over 20 “Hedge Funds” To Appear
September 25, 2008 JP Morgan Chase takes over Washington Mutual, the leading savings bank in the United States. The FDIC has placed the savings bank under supervision. JP Morgan does not take over the holding company, nor the debts not guaranteed by the FDIC, but takes over the assets of network banks ($ 296 billion) and deposits. JP Morgan Chase becomes the first deposit bank, with a total value of $ 911 billion, ahead of Citigroup and Bank of America. It becomes the second bank in number of agents (5,410) behind the Bank of America. It becomes the first bank in the country for the credit card business, the second commercial bank, and the third for mortgage loans.
September 26, 2008 Citigroup takes over Wachovia and becomes the first depository bank.
Belgian bancassurer Fortis slips on the stock market
September 27, 2008 The Daily Telegraph and the Daily Mail report that the UK bank Bradford & Bingley (B&B), hit by the property crisis, could be nationalized
September 28, 2008 Announcement of a rescue operation of the Fortis bank by the three Benelux states which inject $ 11.2 billion
New York Times Says AIG Bankruptcy Cost Goldman Sachs $ 20bn
 

September 29, 2008

The Bradford & Bingley bank is saved from bankruptcy by the Spanish bank Santander and the British government
Citigroup absorbs $ 42 billion in Wachovia debt
Hypo Real Estate obtains sufficient credit facilities from a consortium of German banks to enable it to continue its activity
Majority in US House of Representatives (228 to 205) rejects Paulson plan

The Dow Jones index drops 7%

September 30, 2008 The Belgian, French and Luxembourg governments decide to inject € 6.4 billion into Dexia. The two leaders of the group resign

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Axel Miller laughed a lot thinking about his golden parachute
sent by george_abitbolclasse

 

 

OCTOBER 2008  
October 1, 2008 The US Senate passes by 74 votes to 25 a revised version of the Paulson Plan, the “Emergency Economic Stabilization Act of 2008
October 3, 2008 The US House of Representatives adopts the plan previously adopted by the Senate.
October 3, 2008 Fortis nationalization decision
October 3, 2008 Wells Fargo announces merger with Wachovia, despite the exclusivity commitment enjoyed by Citigroup. Wells Fargo considers the provisions of the law passed by Congress to nullify this agreement.
October 4, 2008 AIG declares that it is refocusing on non-life insurance activities.
October 4, 2008 The Hague nationalizes all Dutch Fortis activities for & è BILLION
October 5, 2008 Bank Hypo Real Estate, a specialist in real estate financing listed in Frankfurt, is saved from bankruptcy at the last minute
October 6, 2008 New Black Monday on the stock market: Paris lost 9.04% during the session, which is an absolute record of decline.
October 6, 2008 BNP Paribas takes control for € 15 billion of Fortis activities in Belgium and Luxembourg

The press announces a plan for a union between the Caisses d’Epargne and the Banques Populaires

October 7, 2008 François Fullon declares that the state will not let a French bank go bankrupt
October 8, 2008 Announcement of the creation of a state structure for state intervention
October 8, 2008 Fall of the stock markets, Paris loses 6.31%, despite the announcement of a coordinated intervention by central banks, including the ECB, which surprisingly cut their rate by 0.5%
October 9, 2008 The three-month Eurbor is at 5.393%, its highest level since late 1994. The one-week Euribor is down to 4.790% after crossing 5% for the first time in more than seven years at 5.019% . Six-month Euribor hits 14-year high at 5.448%

The ECB offered the banks to lend them six days at the rate of 3.75%. It provided $ 100 billion in overnight dollar funds at 5% (against 9.5% the day before).

The three-month Libor is 4.75%. The overnight rate is 5.09% while the Fed rate is 1.5%

 

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