posted on Jul, 30 2011 @ 02:38 PM
TImeline for a Meltdown:
New mortgage laws in the United States allow for higher interest rates and a greater range of products. Many of these target borrowers with bad
Prime Minister Margaret Thatcher's 'Big Bang' deregulates London's financial industry.
Alan Greenspan is appointed Chairman of the Federal Reserve in the United States. He will become the most influential figure in the global economy.
Efforts to regulate these new credit derivatives are resisted by Wall Street and blocked by the White House.
The US Congress repeals the Glass-Steagall Act after a $300 million US lobbying effort by the banking and financial services industries. The law had
separated commercial banks (money lenders) from investment banks (those who organize the sale of bonds & equities).
Iceland’s three biggest banks have assets of only a few billion dollars. Over the next three-and-a-half years bank assets grow to over $140 billion
US, on paper. From 2003-2007, the Icelandic stock market multiplies by nine times. And in Rejkjavik, real-estate prices triple.
Goldman Sachs CEO Hank Paulson lobbies the US Securities & Exchange Commission to allow investment banks to increase their debt-to-capital ratio from
12:1 to 30:1 or higher.
Assistant FBI Director Chris Swecker warns that the booming mortgage market, fueled by low interest rates and soaring home values, has attracted
unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. "It has
the potential to be an epidemic," says Swecker.
Testifying before Congress, Federal Reserve Chairman Alan Greenspan says, "Although a "bubble" in home prices for the nation as a whole does not
appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable
The boom in U.S. housing prices abruptly reverses course. Prices fall. Defaults rise. Dozens of subprime mortgage lenders will soon be going bankrupt.
CNN Money later reports that subprime mortgages have five times the delinquency rate of prime loans.
Ben Bernanke – an academic and Great Depression scholar - succeeds Alan Greenspan as Chairman of the Board of Governors of the United States Federal
Henry Paulson – former CEO of the investment bank Goldman Sachs - is sworn in as United States Treasury Secretary. Paulson was forced to sell $500
million US worth of Goldman stock at the peak of the bull market to adhere to conflict-of-interest rules. During his tenure as CEO, Goldman issued
almost $37 billion US in bonds backed by subprime loans or second mortgages.
"At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be
contained," says Federal Reserve Chairman Ben Bernanke.
It is revealed that two hedge funds run by Bear Stearns are faltering because of investment in bonds backed by subprime mortgages.
Subprime mortgage problems go global as hedge funds and banks around the world reveal substantial holdings of mortgage-backed securities in their
investment portfolios. France's BNP Paribas announces on August 9 that it cannot value the assets held by three of its hedge funds.
With lending markets drying up around the world, central banks coordinate to inject liquidity into credit markets for the first time since 9/11. The
U.S. Federal Reserve, the European Central Bank, and the Banks of Australia, Canada, and Japan all inject money.
The BBC reports UK mortgage lender and bank Northern Rock has asked for emergency support. Within minutes of the bulletin, customers began logging on
to Northern Rock's website and withdrawing their cash. The website then crashed, fueling panic. The next morning, line-ups of depositors withdraw £1
billion in Britain's largest bank run in more than a century.
Dow Jones Industrial Average hits a record peak of 14,164. By February 2009, the Dow will fall to just over 6,500.
Bear Stearns, Wall Street's fifth-largest bank, avoids collapse with an last minute rescue by rival JP Morgan in a deal is backed by the United
Bear Stearns executives Ralph Cioffi and Matthew Tannin are arrested and charged with fraud. To date, Cioffi and Tannin remain the only major US
financial figures to face criminal charges related to the financial meltdown. They were later acquitted of criminal wrongdoing but face civil
Lloyds TSB announces it is to take over Britain's biggest mortgage lender Halifax Bank of Scotland. 25 September 2008 American bank and mortgage
lender Washington Mutual is closed by regulators. It is the second largest bankruptcy in American history and the US largest bank failure ever.
On Wall Street, the Dow Jones Industrial Average falls 778 points -- the biggest point drop in a single day ever.