September - December 2008
The credit crisis shook the global economy and forced a dramatic reconfiguration of Wall Street and its relationship with Washington. Here is a day-by-day look at the early and most crucial stages of the crisis, its impact on the financial system and the steps legislators and government officials took to help avert a meltdown in global financial markets.
The government seizes control of mortgage giants Fannie Mae and Freddie Mac, promising to inject up to $100 billion in total for each company if they are insolvent. The two companies had funded more than two-thirds of U.S. home loans in recent months.
Treas. Sec. Henry Paulson says the government will start buying securities backed by mortgages -- initially, up to $5 billion worth.
Lehman Brothers files for bankruptcy protection.
Bank of America agrees to buy Merrill Lynch.
Global stocks plunge on Wall Street worries.
Oil drops below $100 a barrel.
Dow Jones Industrial Average: -504.48
The Fed lends insurance giant American International Group (AIG) $85 billion in exchange for nearly 80 percent of its stock.
Lehman Brothers heads to bankruptcy court and seeks to sell parts of its business to ease the bankruptcy process.
Dow Jones Industrial Average: +153.40
As banks abruptly stop lending to each other, cash becomes scarce, driving up the cost of capital.
Washington Mutual puts itself up for sale.
Morgan Stanley and Goldman Sachs shares drop 24 and 14 percent respectively.
Morgan Stanley and Wachovia enter merger talks.
The price of gold soars more than 8 percent.
Markets sustain heavy losses as AIG takeover unnerves investors.
Dow Jones Industrial Average: -446.92
The Fed and central banks in Europe, Japan and Canada team up to inject as much as $180 billion into global markets to ease the cash crunch, while investors withdraw $80 billion from money market funds.
The Bush administration urgently prepares a massive rescue plan to revive the U.S. financial system by buying up bad debts choking the books of financial institutions.
Stocks whipsaw, ending on a high note as word spreads of a possible U.S. plan to address the crisis.
Putnam Investments closes a $12.3 billion money-market fund to limit losses to its investors.
Dow Jones Industrial Average: +153.40
President Bush announces a plan to buy troubled assets from financial firms.
Treasury Dept. offers to protect investments in money market funds.
Fannie Mae and Freddie Mac will increase their purchases of mortgage-backed securities.
SEC temporarily bans short-selling in shares of nearly 800 financial institutions and expands its investigations into credit default swaps.
Dow Jones Industrial Average: +360.93
Democrats call for the bailout plan to include caps on executive compensation and aid for struggling homeowners.
Goldman Sachs and Morgan Stanley are converted into bank holding companies, offering them broader government protection in exchange for tighter regulation.
Asian banks invest in Morgan Stanley and gobble up the remains of Lehman Brothers.
The SEC expands its temporary ban on short selling of financial stocks to 100 additional companies.
Inflation fears spark the steepest one-day drop in the dollar in years. Gold prices soar.
Oil prices spike more than $16 a barrel, the biggest one-day price jump ever.
Dow Jones Industrial Average: -372.75
Lawmakers from both parties question policymakers in the first day of Capitol Hill hearings.
Federal Housing Finance Agency official James B. Lockhart III says Fannie Mae and Freddie Mac could not continue to cover mortgage losses without government support.
Despite pressure from Vice President Dick Cheney and Chief of Staff Joshua Bolten, House Republicans are reluctant to approve massive rescue plan.
Dow Jones Industrial Average: -161.52
Peter R. Orszag, the director of the Congressional Budget Office tells the House Budget Committee that the proposed Wall Street bailout could actually worsen the current financial crisis.
Dow Jones Industrial Average: -28.28
Negotiators from the Republican and Democratic parties say they have reached agreement on basic principles governing the massive financial bailout, but later in the day top Republicans deny reports of an agreement.
Federal regulators seize troubled mortgage lender Washington Mutual in the largest bank failure in U.S. history, then immediately sell much of the company to J.P. Morgan Chase for $1.9 billion in a deal that will create the largest bank in the country.
Dow Jones Industrial Average: +196.89
President Bush delivers a brief address on national television saying that key negotiators would pass a bailout bill.
Dow Jones Industrial Average: +121.07
Citigroup agrees to buy the banking operations of Wachovia for $2.16 billion in a deal backstopped by taxpayers and brokered by the Federal Deposit Insurance Corp.
Early in the morning, President Bush urges lawmakers to act quickly to approve the $700 billion proposal hammered out over the weekend.
The Federal Reserve injects hundreds of billions of dollars into the world financial system in response to a plunge in overseas financial markets as a wave of new bank troubles hit Europe.
U.K. financial authorities take over one of the country's major mortgage lenders, Bradford & Bingley, and begin selling it off in pieces. It is the second bank nationalization in the U.K. this year after a depositor run undermined Northern Rock.
Belgium, the Netherlands and Luxembourg agree late Sunday to pump $11.2 billion into Fortis, a major Belgian financial services conglomerate, in exchange for 49 percent ownership of several Fortis units.
Dow Jones Industrial Average: -777.68
The Federal Deposit Insurance Corp. asks Congress to temporarily increase the $100,000 ceiling on bank deposits guaranteed by the government.
The Dow rises almost 500 points as bargain hunters and investors hopeful that lawmakers will eventually pass a bailout package flood back into the market.
President Bush again delivers a nationally televised address saying that the economic damage to the nation would be "painful and lasting" is Congress fails to pass a $700 billion bailout bill.
Japan's Nikkei stock index falls 4.1 percent as dismal new data show that Japan's economy has almost certainly fallen into a recession.
Libor, the rate that banks worldwide charge each other for short-term loans, spikes by more than four percentage points, to 6.9 percent, its highest level ever.
Dow Jones Industrial Average: +485.29