Economy/financial-timeline

Timeline of the United States Housing Bubble - wikipedia

The Great Contraction: Timeline of Events - www.EconomicsOfCrisis.com

Year color code: 0000 = President Senate House - Party Divisions wiki

1930s

• 1933-1939 The New Deal is a group of new laws created to fix problems in the Great Depression economy, including methods to increase home ownership.
• 1934 The National Housing Act of 1934, part of the New Deal, makes more affordable housing and home mortgages. It creates the Federal Housing Administration (FHA)(later HUD) and the Federal Savings and Loan Insurance Corporation.
• 1938 Fannie Mae is founded by the government under the New Deal. It is a stockholder-owned corporation that purchases and securitizes mortgages in order to ensure that funds are consistently available to the institutions that lend money to home buyers.

1968 - 1991

• 1968: The Government mortgage-related agency, Federal National Mortgage Association (Fannie Mae) is converted from a federal government entity to a stand-alone government sponsored enterprise (GSE) which purchases and securitizes mortgages to facilitate liquidity in the primary mortgage market. The move takes the debt of Fannie Mae off of the books of the government.
• 1970 Federal Home Loan Mortgage Corporation (Freddie Mac) is chartered by an act of Congress, as a GSE, to buy mortgages on the secondary market, pool them, and sell them as mortgage-backed securities to investors on the open market. The average cost of a new home in 1970 is $26,600[2] ($140,582 in 2007 dollars). From 1960 to 1970, inflation rose from 1.4% to 6.5% (a 5.1% increase), while the consumer price index (CPI) rose from about 85 points in 1960 to about 120 points in 1970, but the median price of a house nearly doubled from $16,500 in 1960 to $26,600 in 1970.
• 1971 The gold-dollar exchange is eliminated. The gold standard is abandoned. There is no restraint on the creation of money and debt by the banking system. The government starts to print potentially-unlimited amounts of cash in the trillions. This causes a drop in the value of the U.S. dollar which continues today.
• 1974: Equal Credit Opportunity Act imposes heavy sanctions for financial institutions found guilty of discrimination on the basis of race, color, religion, national origin, sex, marital status, or age.
• 1977: Community Reinvestment Act passed to encourage banks and savings and loan associations to offer credit to minority groups on lower incomes or owning small businesses 12 U.S.C. § 2901 et seq.).^[2][3] Beforehand, the companies had been accused of engaging in a practice known as redlining.
• July, 1978: Section 121 allowed for a $100,000 one-time exclusion in capital gain for sellers 55 years or older at the time of sale.^[4]
• 1980: The Depository Institutions Deregulation and Monetary Control Act of 1980 granted all thrifts, including savings and loan associations, the power to make consumer and commercial loans and to issue transaction accounts, but with little regulatory oversight of competing banks; also exempted federally chartered savings banks, installment plan sellers and chartered loan companies from state usury limits.^[5] The cost of a new home in 1980 is $76,400[3] ($189,918 in 2007 dollars).
• 1981: The Section 121 exclusion, allowing for a one-time exclusion in capital gain for sellers 55 years or older at the time of sale, was increased from $100,000 to $125,000.^[6]
• 1981: Each Federal Reserve bank establishes a Community Affairs Office to ensure compliance with Community Reinvestment Act.^[7][8]
• 1983. The financial firms Salomon Brothers and First Boston create the first collateralized debt obligations (CDOs). A CDO is a security whose value and payments come from fixed-income underlying assets. This is significant because CDOs were at the heart of the US financial crisis, since investors were later allowed to buy and sell assets worth ten to twelve times the underlying value.
• 1985–1991: Savings and Loan Crisis caused by rising interest rates and over development in the commercial real estate sector, and exacerbated by deregulation of savings and loan lending standards and a reduction in capital reserve requirements from 5% to 3%.^{[citation needed]}
• 1986: The Tax Reform Act of 1986 eliminated the tax deduction for interest paid on credit cards, encouraging the use of home equity through refinancing, second mortgages and home equity lines of credit (HELOC) by consumers.^[9]
• 1986–1991: New homes constructed dropped from 1.8 to 1 million, the lowest rated since World War II.^[10]
• 1989: One-month drop in sales of previously owned homes of 12.6 percent.^[11]; Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") enacted which established the Resolution Trust Corporation (RTC), closing hundreds of insolvent thrifts and moved regulatory authority to the Office of Thrift Supervision (OTS ); required federal agencies to issue Community Reinvestment Act ratings publicly.^[12]
• 1990: The average cost of a new home in 1990 is $149,800 [4] ($234,841 in 2007 dollars).
• 1991–1997: Flat Housing prices.
• 1991: US recession, new construction prices fall, but above inflationary growth allows them to return by 1997 in real terms.

1992 - 2000

• 1992:Federal Housing Enterprises Financial Safety and Soundness Act of 1992 required Fannie Mae and Freddie Mac to devote a percentage of their lending to support affordable housing increasing their pooling and selling of such loans as securities; Office of Federal Housing Enterprise Oversight (OFHEO) created to oversee them.^[13][14]
• This, combined with the creation of CDOs, meant that Fannie Mae and Freddie Mac, which are organizations that purchase the mortgages from lenders, would just before the crisis began be holding a great amount of loans to poorer borrowers.
• 1994: Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (IBBEA) repeals the interstate provisions of the Bank Holding Company Act of 1956 that regulated the actions of bank holding companies.
• 1995: New Community Reinvestment Act regulations break down home-loan data by neighborhood, income, and race; encourage community groups to complain to banks and regulators by allowing community groups that marketed loans to collect a brokers fee^[15]; Fannie Mae allowed to receive affordable housing credit for buying subprime securities.^[14]
• Changes to the Community Reinvestment Act allow mortgage lenders to receive credit toward their affordable-housing lending obligations for buying subprime securities. Subprime market grows. The subprime market allows poorer borrowers, who have a shorter history of obtaining loans, lower incomes, and fewer assets, to get a loan. These loans are much riskier because the borrower is much weaker.
• 1997. Huge growth in number of mortgage-backed securities purchased by investors. Home prices were increasing starting in 1997, which meant that investors felt that these were reliable investments.
• Mortgage denial rate of 29 percent for conventional home purchase loans.^[16]
  • July: The Taxpayer Relief Act of 1997 repealed the Section 121 exclusion and section 1034 rollover rules, and replaced them with a $500,000 married/$250,000 single exclusion of gain on the sale of a home, available once every two years.^[17] This encouraged people to invest in second homes and investment properties.
  • November: Fannie Mae helped First Union Capital Markets and Bear, Stearns & Co launch the first publicly available securitization of CRA loans, issuing $384.6 million of such securities. All carried a Fannie Mae guarantee as to timely interest and principal.^[18][19]

• 1999:
  • September: Fannie Mae eases the credit requirements to encourage banks to extend home mortgages to individuals whose credit is not good enough to qualify for conventional loans.^[22]
  • This was done to help low-income consumers purchase homes, and it further encouraged weak borrowers to obtain home loans.
  • November: Gramm-Leach-Bliley Act "Financial Services Modernization Act" repeals Glass-Steagall Act, deregulates banking, insurance and securities into a financial services industry allow financial institutions to grow very large; limits Community Reinvestment Coverage of smaller banks and makes community groups report certain financial relationships with banks.^[21]
  • This allowed one institution to act as both commercial bank and investment bank. Commercial banks make loans, while investment banks raise capital and trade securities for businesses. This meant that institutions that were commercial banks and investment banks were not regulated strictly as banks. They therefore had looser capital requirements and the banking side of these new institutions took on the profit-oriented mentality of the investment side.
• 1995–2001: Dot-com bubble.
  • March 10, 2000: NASDAQ Composite index peaked, Dot-com bubble collapse begins.
• 1999-2000: the U.S. Federal Reserve increased interest rates six times,^[8] and the economy began to lose speed. (Dot-com bubble)

• 2000:
  • October: Fannie Mae committed to purchase and securitize $2 billion of Community Investment Act-eligible loans. ^[23][24]
  • November: Fannie Mae announced that the Department of Housing and Urban Development (“HUD" ) would soon require it to dedicate 50% of its business to low- and moderate-income families" and its goal was to finance over $500 billion in Community Investment Act-related business by 2010.^[25]
  • December:Commodity Futures Modernization Act of 2000 defines interest rates, currency prices, and stock indexes as "excluded commodities," allowing trade of credit-default swaps by hedge funds, investment banks or insurance companies with minimal oversight^[26], and contributing to 2008 crisis in Bear Stearns, Lehman Brothers, and AIG.^[27][28][29]
  • allows trading of credit-default swaps with minimal oversight. A credit derivative contract between a buyer and seller. The buyer makes payments to a seller and received a payoff if the underlying financial instrument defaults. (A future is a contract to sell or buy a commodity in the future.)

2001 - 2006

• 1997–2005:Mortgage fraud increased by 1,411 percent.^[30]
• 2000–2003: Early 2000s recession (exact time varies by country).
• 2001–2005: United States housing bubble (part of the world housing bubble).
• 2001: US Federal Reserve lowers Federal funds rate 11 times, from 6.5% to 1.75%.^[31]
• Dot-com bubble bursts and in response, US Federal Reserve dramatically cuts interest rates. Federal Reserve Chairman Alan Greenspan has been accused of creating an environment ripe for crisis due to the allowance of very low interest rates. Introduction by David X. Li of Gaussian copula function, which is widely adopted throughout the financial industry and popularizes asset backed securities. The function allowed hugely complex risks to be modeled with more ease and accuracy than ever before. Li, a star mathematician from rural China, made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels. Li's breakthrough was that instead of waiting to assemble enough historical data about actual defaults, which are rare in the real world, he used historical prices from the CDS market. This built up the market for asset backed securities on overvalued CDS prices, which turned out to be a very bad idea. But as Li himself said of his own model: "The most dangerous part is when people believe everything coming out of it."
• 2002–2003: Mortgage denial rate of 14 percent for conventional home purchase loans, half of 1997.^[16]
• 2002: Annual home price appreciation of 10% or more in California, Florida, and most Northeastern states."Annual home-value growth at highest rate since 1980". http://www.allbusiness.com/finance/3595974-1.html. Retrieved 2008-10-06.
  • June 17: President G.W. Bush sets goal of increasing minority home owners by at least 5.5 million by 2010 through billions of dollars in tax credits, subsidies and a Fannie Mae commitment of $440 billion to establish NeighborWorks America with faith based organizations.^[32]
  • Fannie Mae and Freddie Mac start purchasing large amounts of subprime mortgages.
  • Home price appreciation begins. Home prices began to appreciate as investors took their money out of the bottoming stock market and put it into real estate. Demand for housing grew as both these investors and individuals, particularly subprime borrowers, purchased homes, driving up prices.

• 2003: Fannie Mae and Freddie Mac buy $81 billion in subprime securities.^[14]
  • June: Federal Reserve Chair Alan Greenspan lowers federal reserve’s key interest rate to 1%, the lowest in 45 years.^[33]
  • September: Bush administration recommended moving governmental supervision of Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. The changes were blocked by Congress.^[34]
  • December: President Bush signs the American Dream Downpayment Act to be implemented under the Department of Housing and Urban Development. The goal was to provide a maximum downpayment assistance grant of either $10,000 or six percent of the purchase price of the home, whichever was greater. In addition, the Bush Administration committed to reforming the homebuying process that would lower closing costs by approximately $700 per loan. It was said it would further stimulate homeownership for all Americans.^[35]
• 2003-2007: The Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned loan standards (employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability), emphasizing instead lender's ability to securitize and repackage subprime loans.^[26]
• 2004: Financial institutions start to issue huge amounts of mortgage-backed securities. This was due a combination of factors that made securities more profitable, especially after leveraging restrictions were lifted, allowing securities priced at many times the underlying value to be issued. Securities issuers could make a lot of money from the high prices of securities, while securities investors assumed home prices would continue to increase and that they would make money on the securities.

• 2004:
  • U.S. homeownership rate peaked with an all time high of 69.2 percent.^[36]
  • HUD ratcheted up Fannie Mae and Freddie Mac affordable-housing goals for next four years, from 50 percent to 56 percent, stating they lagged behind the private market; from 2004 to 2006, they purchased $434 billion in securities backed by subprime loans.^[14]
  • April: The SEC lifts leveraging restrictions. (see previous)
  • October:SEC effectively suspends net capital rule for five firms - Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley. Freed from government imposed limits on the debt they can assume, they levered up 20, 30 and even 40 to 1.^[37]
• 2004–2005: Arizona, California, Florida, Hawaii, and Nevada record price increases in excess of 25% per year.^{[citation needed]}
• 2005–ongoing: United States housing market correction ("bubble bursting").
  • February: The Office of Thrift Supervision implemented new rules that allowed savings and loans with over $1 billion in assets to meet their CRA obligations without investing in local communities, cutting availability of subprime loans.
  • September: The FDIC, Federal Reserve, and the Office of the Controller of the Currency allow loosening of Community Reinvestment Act requirements for "small" banks, further cutting subprime loans.^[38][15]
  • Fall 2005: Booming housing market halts abruptly; from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide dropped of 3.3 percent.^[39]
  • Year-end: A total of 846,982 properties were in some stage of foreclosure in 2005.^[42]

• 2006: Continued market slowdown. Prices are flat, home sales fall, resulting in inventory buildup. U.S. Home Construction Index is down over 40% as of mid-August 2006 compared to a year earlier.
• Home prices began a rapid decline. This occurred because as mortgage loan terms changed and interest rates rose, families were no longer able to afford their homes. The homes went into foreclosure and the excess supply of homes put downward pressure on home prices. Subprime mortgage borrowers had been given loans that would increase in interest rates after an initial period of very low interest rates.
• A total of 1,259,118 foreclosures were filed during the year, up 42 percent from 2005.^[43]

2007

Year-to-year decreases in both U.S. home sales and home prices accelerates rather than bottoming out, with U.S. Treasury secretary Paulson calling the "the housing decline ... the most significant risk to our economy."^[40] Home sales continue to fall. The plunge in existing-home sales is the steepest since 1989. In Q1/2007, S&P/Case-Shiller house price index records first year-over-year decline in nationwide house prices since 1991.^[41] The subprime mortgage industry collapses, and a surge of foreclosure activity (twice as bad as 2006^[42]) and rising interest rates threaten to depress prices further as problems in the subprime markets spread to the near-prime and prime mortgage markets. ^[43]

• February–ongoing: 2007 Subprime mortgage financial crisis Subprime industry collapse; more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.
• More than 25 subprime lending firms declare bankruptcy in February and March, while the largest subprime lender, New Century, declares bankruptcy in April. This occurs due to increasing defaults on subprime loans. As interest rates on subprime loans adjusted upwards, families could not afford to pay the increased payments, and were not able to refinance their homes because their home value had declined.
• April 2: New Century Financial, largest U.S. subprime lender, files for chapter 11 bankruptcy.^[44]
• July 19: Dow Jones Industrial Average closes above 14,000 for the first time in its history.^[45]
• Bear Stearns announces major losses in two of its hedge funds. This was due to investments in asset-backed securities, which Bear Stearns pioneered. As subprime loans failed, the asset-backed securities that were based on the subprime loans also started to fail.

• August: worldwide "credit crunch" as subprime mortgage backed securities are discovered in portfolios of banks and hedge funds around the world, from BNP Paribas to Bank of China. Many lenders stop offering home equity loans and "stated income" loans. Federal Reserve injects about $100B into the money supply for banks to borrow at a low rate.
• Global hedge funds and banks reveal major exposure to subprime problems through holdings of mortgage-backed securities. As it turns out, many, many banks worldwide held these asset-backed securities based on subprime loans.
• August 6: American Home Mortgage files for chapter 11 bankruptcy.^[46]
• August 7: Democratic presidential front-runner Hillary Clinton proposes a $1 billion bailout fund to help homeowners at risk for foreclosure.^[47]
• August 16: Countrywide Financial Corporation, the biggest U.S. mortgage lender, narrowly avoids bankruptcy by taking out an emergency loan of $11 billion from a group of banks.^[48]
• August 17: Federal Reserve lowers the discount rate by 50 basis points to 5.75% from 6.25%.^[49]
• August 31: President Bush announces a limited bailout of U.S. homeowners unable to pay the rising costs of their debts. ^[50]Ameriquest, once the largest subprime lender in the U.S., goes out of business.^[51]
• September 1–3: Fed Economic Symposium in Jackson Hole, WY addressed the housing recession that jeopardizes U.S. growth. Several critics argued that the Fed should use regulation and interest rates to prevent asset-price bubbles,^[52] blamed former Fed-chairman Alan Greenspan's low interest rate policies for stoking the U.S. housing boom and subsequent bust,^[53][54] and Yale University economist Robert Shiller warned of possible home price declines of 50 percent.^[55]

• September 13: Northern Rock receives emergency funding from the Bank of England, after which depositors make a run on the bank. Northern Rock faced a big problem as liquidity was cut off after the subprime crisis began, and the mortgage lender could not receive loans from institutional lenders. This was a signal that there was a real liquidity crisis, or shortage in funding from other banking and investment institutions.
• September 14: A run on the bank forms at the United Kingdom's Northern Rock bank precipitated by liquidity problems related to the subprime crisis.^[56]
• September 17: Former Fed Chairman Alan Greenspan said "we had a bubble in housing" ^[57][58] and warns of "large double digit declines" in home values "larger than most people expect."
• September 18: The Fed lowers interest rates by half a percent (50 basis points) to 4.75% in an attempt to limit damage to the economy from the housing and credit crises.^[59]
• September 28: Television finance personality Jim Cramer warns Americans on The Today Show, "don't you dare buy a home—you'll lose money," causing a furor among Realtors.^[60]
• September 30: Affected by the spiraling mortgage and credit crises, Internet banking pioneer NetBank goes bankrupt^[61] NetBank Inc was the largest savings and loan failure since the tail end of the Savings and Loan crisis in the early 1990s. ^[62] and the Swiss bank UBS announced that it lost US$690 million in the third quarter.^[63]
• September 30: Prices fell 4.9 percent from September 2006 in 20 large metropolitan areas, according to Standard & Poor's/Case-Shiller indexes. This is the 9th straight month prices have fallen.^[64

• October 10: US Government and private industry created Hope Now Alliance to help some sub-prime borrowers.^[65]
• October 15–17: A consortium of U.S. banks backed by the U.S. government announced a "superfund" or "super-SIV" of $100 billion to purchase mortgage-backed securities whose mark-to-market value plummeted in the subprime collapse.^[66] Fed chairman Ben Bernanke expressed alarm about the dangers posed by the bursting housing bubble;^{[citation needed]} Treasury Secretary Hank Paulson said "the housing decline is still unfolding and I view it as the most significant risk to our economy. ... The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."^[40]
• October 31: Federal Reserve lowers the federal funds rate by 25 basis points to 4.5 percent and the discount window rate by 25 basis points to 5 percent.
• October 31: Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poor's/Case-Shiller indexes. This is the 10th straight month prices have fallen.^[64]
• November 1: Federal Reserve injects $41B into the money supply for banks to borrow at a low rate. The largest single expansion by the Fed since $50.35B on September 19, 2001.
• December 6: President Bush announced a plan to voluntarily freeze the mortgages of a limited number of mortgage debtors holding ARMs for 5 years. The plan run by the Hope Now Alliance. Its phone number is 1-888-995-HOPE.^[67] Some experts criticized the plan as "a Band-Aid when the patient needs major surgery",^[68] a "teaser-freezer",^[69] and a "bail-out".^[70][71]

• December 11: Federal Reserve lowers the federal funds rate by 25 basis points to 4.25 percent and the discount window rate by 25 basis points to 4.75 percent.
• December 12: Federal Reserve injects $40B into the money supply for banks to borrow at a low rate and coordinates such efforts with central banks from Canada, United Kingdom, Switzerland and European Union.
• December 24: A consortium of banks officially abandons the U.S. government-supported "super-SIV" mortgage crisis bail-out plan announced in mid-October,^[72] citing a lack of demand for the risky mortgage products on which the plan was based, and widespread criticism that the fund was a flawed idea that would have been difficult to execute.^[72]
• December 26: Standard & Poor's/Case-Shiller indexes of housing prices in 20 large metropolitan areas for October 2007 is released showing that for the 10th straight month priced have fallen, but most worrying is that the decline in home prices accelerated and spread to more regions of the country in October. "Since their peak in July 2006, home prices in the 20 regions have dropped 6.6 percent.^[64] Economists' predictions of the total amount of home price declines from the bubble's peak range from moderate 10–15 percent to larger 30–50 percent price declines in some areas.^[55][64]
• December 28: The November U.S. Commerce Department's "stunningly weak report" released on December 28, 2007 show that year to year decreases in both U.S. home sales and home prices is accelerating rather than bottoming out due to "eminently rational behaviour" based on "a psychological point where expectations of future price declines have become entrenched".^[73]
• Year-end: A total of 2,203,295 foreclosures were filed on 1,285,873 properties during the year, up 75 percent from 2006. More than 1 percent of all households were in some stage of foreclosure during 2007, up from 0.58 percent in 2006.^[78]

2008

Home sales continue to fall. Fears of a U.S. recession. Global stock market corrections and volatility.

• January 2–21: January 2008 stock market downturn.
• January 21: Global stock markets suffer largest fall since September 11, 2001. This was due to fears that the proposed stimulus package in the US would not be enough to prevent a large recession. The scope of the financial crisis was just beginning to be revealed.
• January 24: The National Association of Realtors (NAR) announced that 2007 had the largest drop in existing home sales in 25 years,^[74] and "the first price decline in many, many years and possibly going back to the Great Depression."^[75]
• National Association of Realtors shows 2007 had the largest drop in home sales in 25 years. Excess supply of home inventory places significant downward pressure on prices, and as foreclosures increased, people were forced to leave their homes because they could not repay their loans. Thus there were more and more homes for sale.
• March 10: Dow Jones Industrial Average at the lowest level since October 2006, falling more than 20% from its peak just five months prior.
• March 14–18: Dropping valuations of mortgage securities caused by skyrocketing default and foreclosure rates forces margin calls to the Wall Street bank Bear Stearns for debts the bank used to leverage mortgage issuances, and threatens BSC with bankruptcy and causes worldwide market jitters. In a weekend deal brokered by U.S. Treasury secretary Paulson and Fed chairman Ben Bernanke, JPMorgan bank agrees to purchase BSC for $2 per share, compared to their 2007 high of nearly $170, in exchange for the Federal Reserve Bank agreeing to accept BSC's devalued mortgage backed securities as collateral for public loans at the newly created Term Securities Lending Facility (TSLF), effectively providing a mechanism to bail out Wall Street banks threatened with insolvency.^[76]
• March 14: Bear Stearns is purchased for $2 a share by JPMorgan Chase. A year earlier share prices had been $170 per share. The problems were caused by overexposure to the subprime mortgage crisis. JP Morgan Chase was prodded to purchase Bear Stearns by the US government, since Bear was on the brink of collapse.
• March 1–June 18: 406 people were arrested for mortgage fraud in an FBI sting across the U.S., including buyers, sellers and others across the wide-ranging mortgage industry.^[77]
• June 18: As the chairman of the Senate Banking Committee Connecticut's Christopher Dodd proposed a housing bailout to the Senate floor that would assist troubled subprime mortgage lenders such as Countrywide Bank, Dodd admitted that he received special treatment, perks, and campaign donations from Countrywide, who regarded Dodd as a "special" customer and a "Friend of Angelo." Dodd received a $75,000 reduction in mortgage payments from Countrywide.^[78][79] The Chairman of the Senate Finance Committee Kent Conrad and the head of Fannie Mae Jim Johnson also received mortgages on favorable terms due to their association with Countrywide CEO Angelo R. Mozilo.^[80][78]
• June 19: Ex-Bear Stearns fund managers were arrested by the FBI for their allegedly fraudulent role in the subprime mortgage collapse. The managers purportedly misrepresented the fiscal health of their funds to investors publicly while privately withdrawing their own money.^[81]
• July: The European Central Bank increases the interest rate by 25 basis points.
• July 30: Housing and Economic Recovery Act of 2008 changes the $250,000/$500,000 capital gains exclusion applying to second homes and rental property.^[82]
• 2008, 09-7. Fannie Mae and Freddie Mac are taken over by the US government. This was because they owned more than $5 trillion of mortgage backed securities. They therefore had a huge exposure to potential losses in this market. US taxpayers would be responsible for propping up these institutions where they needed financial support. It also brought both Fannie Mae, which was created by Congress during the Great Depression to help with home ownership, and Freddie Mac, created in 1970 as a competitor to Fannie Mae, back into the fold of the government after a multi-decade attempt at privatization.
• 2008, 09-15. Lehman Brothers files for bankruptcy protection. Lehman had incurred billions of dollars in losses due to the mortgage crisis, and could not find a buyer. The US government also chose not to bail it out as an example to other institutions that they were not necessarily going to be bailed out by the government. This was later seen as a mistake on the part of the US government, since it created problems throughout the financial system.
• 2008, 09-16. US government bails out AIG. AIG had insured mortgage-backed securities. Panic in money markets as one fund declines in value. Reserve Primary Fund dropped below $1 a share because of losses on debt issued by Lehman Brothers. A money market fund is a type of mutual fund that is required by law to invest in low-risk securities. These funds have relatively low risks compared to other mutual funds and pay dividends that generally reflect short-term interest rates. The fact that one fund declined in value meant that potentially even low-risk investments were vulnerable to the crisis. The government stepped in and guaranteed these funds in order to prevent further financial fallout.
• 2008, 09-19. Treasury Secretary Henry Paulson proposes rescue plan called the Troubled Assets Relief Program. The plan proposed authorizing the government to buy troubled assets at discounts from financial institutions. "Troubled assets" were defined as residential or commercial mortgages or mortgage backed securities, or other securities determined by the Treasury as troubled.
• 2008, 09-21. Goldman Sachs and Morgan Stanley convert to bank holding companies. The two investment bank conglomerates did so in order to accept bank deposits to ease cash flow concerns, take advantage of the federal reserve’s lending for banks, and more easily merge with other banks. As bank holding companies, both firms would come under the supervision of national bank regulators. This would force them to lower their leverage but would in turn give them a better chance of survival.
• 2008, 09-25. Bank failures continue.
• 2008, 09-29. British mortgage lender Bradford and Bingley is taken over by the government. The lender found themselves short of liquidity as their share prices and new issues declined, and as TPG Capital withdrew its promise to take a 23% stake in the company. The British government took over the bank’s mortgages and sold off the savings business and the branches. Fortis receives a capital injection. As share prices declined, business customers made large withdrawals, creating massive liquidity problems. The Belgian banking and insurance company received 11.2 billion Euros from the Netherlands, Belgium and Luxembourg. Hypo Real Estate receives capital injection. Hypo Real Estate was the second largest commercial property lender in Germany, and encountered liquidity problems due to liquidity problems in its Depfa Bank subsidiary.
• 2008, 10. Currency crises loom in Eastern Europe as carry trades reverse, due to sharp declines in profitability from investing abroad. Western European banks held exposure to Eastern European mortgage loan borrowers, and as funding was reversed due to the liquidity crisis in Western Europe, Eastern European nations found themselves close to a currency crisis as their pegged currencies were suddenly devalued (since demand for foreign currency would increase), leaving borrowers with skyrocketing debt.
• 2008, 10-03. US passes $700 financial sector bailout package. This is the TARP package, which initially set out to buy bad debts from failing institutions, but then was used to inject liquidity directly into failing institutions in return for government ownership of preferred stock. The TARP package reversed course in March 2009 to again purchase bad loans and securities from failing institutions. Developing countries face problems caused by food, fuel and financial crises.
• 2008, 10-10. BNP Paribas takes over Fortis operations in Belgium and Luxembourg. Fortis had been partly nationalized a week earlier. The central banks of the United States, European Union, Britain, China, Canada, Sweden, and Switzerland make coordinated interest rate cuts. This was a move of unprecedented scope that reflected the scope of the crisis.
• 2008, 10-28. Hungary receives loan from IMF. Hungary, Ukraine and Iceland had faced sudden banking and currency crises as foreign investment fled the country. One 10-29 through 31, the Federal Reserve cuts the interest rate by 50 basis points; the Central Bank of Norway cuts the interest rate by 50 basis points; the Central Bank of China cuts the interest rate by 27 basis points. The Central Bank of Japan cuts the interest rate by 20 basis points.
• 2008, 11-06. The IMF approves a loan to Ukraine. (see above) The Central Bank of Denmark cuts the interest rate by 50 basis points; the European Central Bank cuts the interest rate by 50 basis points; the Bank of England cuts the interest rate by 150 basis points; the Central Bank of Switzerland cuts the interest rate by 50 basis points; the Central Bank of the Czech Republic cuts the interest rate by 75 basis points.
• 2008, 11-09. China announces stimulus package. China’s $586 billion stimulus package was the largest in its history and was a wide-ranging plan that would, among other things, expand social welfare spending and create jobs through construction of infrastructure. This was done to cope with rapidly slowing economic growth, as a downturn in investment and exports led to factory closings in southern China. The day after, on 11-10, Franklin Bank and Security Pacific Bank fail in the US.
• 2008, 11-14. The Euro Area is officially in recession.
• 2008, 11-20. The IMF approves a loan to Iceland. (see above)
• 2008, 11-23. Citigroup receives a $20 billion cash injection in return for the government taking preferred shares in the bank. The money came from the $700 billion bailout package to assist the firm which faced potential losses on $306 billion on high-risk assets.
• 2008, 11-26. EU unveils the anti-crisis plan; the Central Bank of China cuts the interest rate by 108 basis points.
• 2008, 12-1 through 5. Big fall on stock markets; London Scottish Bank fails (is forced into administration). The Central Bank of Australia cuts the interest rate by 100 basis points; the Bank of Japan starts to accept BBB-rated corporate bonds as collateral. The Central Bank of Sweden cuts the interest rate by 175 basis points; The Bank of England cuts the interest rate by 100 basis points; the European Central Bank cuts the interest rate by 75 basis points; the Central Bank of Denmark cuts the interest rate by 75 basis points. Big fall on European stock markets; the US labour market lost 533000 jobs in November.
• Year-end: A total of 3,157,806 foreclosures were filed on 2,330,483 properties during the year, up 81 percent from 2007. More than 1.84 percent of all households were in some stage of foreclosure during 2008, up from 1.03 percent in 2007.^[88]

2009

• 2009, 01-20. Barack Obama takes his post as the new President of the United States. His top priority was to fix the US’s ailing economy by creating jobs and increasing accountability in the financial system.
• 2009, 01-27. Iceland’s government collapses due to financial turmoil, followed by that of Belgium and Latvia in February. Social and political tensions in Latvia were said to cause the worst rioting since the collapse of the Soviet Union after 1991.
• 2009, 02-17. President Obama signs stimulus package into law. The $787 billion stimulus package would implement tax cuts, create jobs in building infrastructure, and provide further social welfare funding. The package also promised money to education and health care, as well as to science and technology.
• 2009, 04-02. G-20 Summit resolves to improve financial regulations. The meeting committed $1.1 trillion mostly to the IMF, to assist trade, emerging economies in crisis, and in Special Drawing Rights, the IMF’s synthetic reserve currency.
• 2009, 05. Results of bank "stress tests" released. “Stress tests” tested to see whether banks could survive among potential additional losses. ”Stress tests” showed banks would need less capital than was feared, although US government regulators told banks they needed to raise around $75 billion more in capital.
• 2009, 06-01. Large US car company, GM, announced bankruptcy filing. GM emerged from bankruptcy about six weeks later, on July 10.
• 2009, 06-17. US Treasury released proposal for reforming financial regulatory system. This proposal is downloadable here: http://www.financialstability.gov/roadtostability/regulatoryreform.html, and was created to prevent future crises.
• 2009, 07. China announced growth rate in GDP of 7.9% in the second quarter of 2009. This figure was up from 6.1% growth in the first quarter, due to the effects of the stimulus package.
• 2009, 08. Ben Bernanke is re-nominated as President of the Chairman of the Board of Governors of the Federal Reserve.
• 2009, 09. The Treasury Department issues the 'Next Phase' report that outlines the winding down of emergency government support.
• 2009, 10. The Dow Jones Industrial Average closes above 10,000. 43 poorest countries are still suffering from the global crisis.
• 2009, 11. CIT Group files for bankruptcy.
• 2009, 12. Treasury Secretary Timothy Geithner announces that TARP will be extended to October 3, 2010, and will focus on preventing foreclosures, providing capital to small banks, and possibly increasing the Term Asset Backed Securities Loan Facility. The US House of Representatives passes legislation that would create a Financial Stability Council and a Consumer Financial Protection Agency, as well as help regulate OTC derivatives, hedge funds, and failing financial institutions. Greece enters crisis: http://www.reuters.com/article/idUSTRE6124EL20100203.

2010

• 2010, 02. EU leaders pledge to support Greece through its financial crisis.

• 2010, 04. EU leaders agree on a Greece bailout package. Spanish and Portuguese bonds downgraded.

• 2010, 07. US passes financial reform bill, called the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173).

• Mid-year: A total of 1,961,894 foreclosures were filed on 1,654,634 properties during the first half of the year, up 5 percent from same period last year. More than 1.28 percent of all households were in some stage of foreclosure during the first half of 2010.^[90]

• Year-end: A total of 3,825,637 foreclosures were filed on 2,871,891 properties during 2010, up nearly 2 percent from the previous year. More than 2.23 percent of all households were in some stage of foreclosure during 2010.^[91]

2011

• Mid-year: A total of 1,170,402 properties received foreclosure notices during the first half of the year, down 29 percent from same period last year. 0.9 percent of all households were in some stage of foreclosure during the first half of 2011.^[92]