Financial Crisis 2008

Main Points

Countrywide Financial Acquired by Bank of America

January 11, 2008

Bear Stearns

March 2008

Bear Stearns has difficulty raising short-term financing;
customers begin to withdraw their money

 Bear is sold to JP Morgan Chase with Federal Reserve
assistance

 The Fed opens its discount window to the four remaining
investment banks
- Fed actions provide only temporary relief

IndyMac Shuts Down

July 12, 2008

GSEs

September 7, 2008

Fannie Mae and Freddie Mac, two governmentsponsored enterprises (GSEs) are placed into conservatorship

Lehman Brothers Fails

September 14, 2008

Merrill Lynch is acquired by Bank of America

September 14, 2008

Banks and financial intermediaries around the world stop lending

September 15, 2008

AIG Rescued

September 16, 2008

Reserve Fund is Rescued

September 16, 2008

other money market mutual funds are
guaranteed

Golden Sachs and Morgan Stanley become Bank Holding companies

September 21, 2008

Bernanke and Paulson ask Congress for $770 billion in TARP funds

September 23, 2008

JP Morgan Chase Acquires Washington Mutual

September 25, 2008

Congress initially refuses; Dow falls over 700 points in single day

September 29,2008

Emergency Economic Stabilization Act

October 3, 2008

commonly referred to as a bailout of the U.S. financial system, is a law enacted in response to the subprime mortgage crisis authorizing the United States Secretary of the Treasury to spend up to $700 billion to purchase distressed assets, especially mortgage-backed securities, and supply cash directly to banks. The funds for purchase of distressed assets were mostly redirected to inject capital into banks and other financial institutions while the Treasury continued to examine the usefulness of targeted asset purchases.[1][2] Both foreign and domestic banks are included in the program. The Federal Reserve also extended help to American Express, whose bank-holding application it recently approved.[3] The Act was proposed by Treasury Secretary Henry Paulson during the global financial crisis of 2008.

General Motors on the Brink of Bankruptcy

November 18 2008

Chrysler Bailout

December 2008

Bernard Madoff Arrested

December 11, 2008

Stopgap Auto Bailout to Help General Motors

December 19, 2008